The National Treasury published its monthly government revenue and expenditure data for December on Friday (29 January), showing better than expected revenue collection ahead of the February budget.
In the first nine months of the 2021/22 fiscal year, South Africa’s gross tax revenue rose by 29.5% year-on-year. This compares with the projection for a 19% increase for the entire fiscal year, through to March 2022, outlined in the November 2021 Treasury budget statement, the Bureau for Economic Research (BER) said in a research note on Monday.
“If the current rate of outperformance is sustained through March, tax revenue in 2021/22 will exceed the November projection by a significant R132 billion.
“This supports our view that the main budget deficit for 2021/22 will turn out to be notably smaller than the 6.6% of GDP projected in November.”
Finance minister Enoch Godongwana is set to deliver his maiden budget address on 23 February. In his medium-term budget policy statement (MTBPS) on 11 November, Godongwana said the government is still committed to reducing the budget deficit and stabilising the debt-to-GDP ratio – and, barring major new shocks or unbudgeted spending commitments, staying the course will lead to a primary fiscal surplus in 2024/25.
“Over the next three years, spending will remain restrained. To avoid a widening of the budget deficit, changes to spending will be funded through improved revenue performance or through reprioritisation and reviewing existing programmes.”
South Africa’s fiscal position was already weak prior to the economic crisis in 2020. While surging commodity prices have improved the in-year revenue outlook, these temporary benefits result in declining surpluses over the medium term.
Notably, revised revenue projections fall short of pre-Covid-19 expectations by R284.7 billion until 2022/23, Treasury said.