Star 2024-02-22

THE FINANCIAL position of state-owned entities has deteriorated further in 2022/23 due to the weak economy and historically poor performance, and more of these companies are failing to submit financial statements on time because of this, the National Treasury said in the Budget yesterday. Subsequently, the Eskom debt relief programme was introduced in the year and the South African Post Office was placed in business rescue, while a guarantee framework agreement was concluded for Transnet. The net asset value of state-owned companies declined by 2.8% to R407.4 billion in 2022/23, mainly due to increased losses reported by most of the state-owned companies. Average profitability measured by return on equity deteriorated from -2.6% in 2021/22 to -7.7% in 2022/23. The National Treasury said the negative return on equity was mainly…

THE NATIONAL Treasury is betting on a projected decline in consumer inflation and ramped-up investments in renewable energy projects to lift South Africa’s dwindling economic growth out of more than a decade-long downward spiral. The Treasury yesterday revised South Africa’s 2023 gross domestic product (GDP) growth estimate down to 0.6%, from 0.8% projected in November, due to widespread power cuts, operational and maintenance failures in freight rail and at ports, and high cost of living. According to the 2024 Budget Review, headline inflation is projected to moderate from 6% in 2023 to 4.9% in 2024, and towards a touch of the midpoint target range at 4.6% in 2025 as food and fuel inflation continue to decline. However, the annual consumer inflation crept up in January, rising to 5.3% from 5.1%…

THE GOLD and Foreign Exchange Contingency Reserve Account (GFECRA) held at the South African Reserve Bank (SARB) will be tapped to reduce government’s borrowing requirements and ease the debt service burden. The GFECRA captures valuation gains on South Africa’s foreign ex- change reserves as the rand has moved from R10/$1 in 2014 to R19/$1 currently. This has meant that the GFECRA balance has grown from R1.8 billion in March 2006 to R507.3bn in January 2024. Previously, these gains or losses were not settled, but were reflected as assets or liabilities on the financial statements of the National Treasury and the SARB. The GFECRA was created to insulate the SARB’s profit-and-loss statement from currency swings, as the valuation losses were charged to the National Treasury. The Treasury has now decided…

Country’s gross loan debt has grown from R1.58 trillion in 2013/14 to R5.21 trillion in 2023/24 SOUTH Africa’s credit ratings status will come under serious scrutiny in the weeks ahead on the back of fiscal slippage as the government borrowing continues to exceed tax revenue collected by the end of the 2023/24 financial year. According to the 2024 Budget Review tabled in Parliament yesterday, gross loan debt has grown from R1.58 trillion in 2013/14 to R5.21trln in 2023/24. As a percentage of gross domestic product (GDP), the government gross loan debt is currently at its highest point since 1947, and the debt-to-GDP trajectory is about 16 percentage points higher than the median emerging market level. Finance Minister Enoch Godon- gwana yesterday said the 2023/24 main Budget deficit – government…

THE COST OF servicing debt continues to choke the economy and the public finances and in yesterday’s Budget, one in five rand in revenue and taxes received by the government is spent on this. This government is spending more to repay debt than on basic education, social protection or health. The Budget tried to strike a balance between the need for national development and the sustainability of public finances, despite the low economic growth, which has crimped revenue. The Budget allocated one in ten rand to the social wage, or spending on education, health, social protection, community development and employment programmes. Over the medium term, total government expenditure is expected to grow from R2.37 trillion in 2024/5 to R2.47trln in 2025/26 and to R2.6trln in 2026/27. Additional allocations of…

FROM SEPTEMBER 1, contributions to retirement funds will be split, with one-third going into a “savings component” pot and two-thirds going into a “retirement component” pot. The two-pot retirement reform allows pre-retirement access to a portion of one’s retirement assets in times of personal stress, such as medical bills or unemployment and arose out of trade union pressure to access retirement funds during the national lockdown in 2020 when many people could not go to their place of employment due to fears that they would spread the Covid-19 virus. The need to access savings funds is also evident in the penalties incurred by members of the public when they redeem their RSA Savings Bonds before maturity. These penalties have surged from R136 million in February 2022 to R715m in…