The government has kept public spending priorities largely unchanged ahead of the May election

Plan for a gradual expansion of austerity measures, including tax hikes, after the May election

Multinationals selling to the public sector should plan for weak demand growth, tough pricing negotiations, and payment delays for the foreseeable future. Firms looking to raise performance should focus on departments receiving above-inflation budget allocations, or position their offerings as providing efficiency gains and cost-cutting solutions to cash-strapped government departments. Multinationals exposed to consumer spending should assess how fiscal drag on income taxes will affect demand for high-priced and premium goods and services, and consider adjusting their product portfolios to include lower-priced options. In contrast, the extension of the Social Relief of Distress grant will contribute to steady, if not growing, demand for mass-market products such as FMCGs. All multinationals should assess how the gradual rise in tax rates after the May 29 election will affect their pricing strategies and customer sentiment and consider ways of trimming costs to protect margins and market share.


  • The 2024/2025 budget presented to parliament on February 21 by Finance Minister Enoch Godongwana revealed a marginal improvement in fiscal projections following the government’s decision to draw on ZAR 500 billion held in the Reserve Bank’s Gold and Foreign Exchange Contingency Reserve Account (GFECRA).
  • However, most government departments face real-terms cuts to funding over the coming fiscal year. Adjusted for inflation, the sharpest cuts will be to general public services and administration (-8.5% YOY), defense (-5.6% YOY), health (-3.9% YOY), education (-3.5% YOY), and social development (-0.5% YOY). The only functions to receive real-terms funding increases are economic regulation (+5.5% YOY) and policing (+1.2% YOY).
  • No new taxes or changes to tax rates were announced. However, the decision to leave income tax bands unchanged despite projected inflation of 5.6% YOY in 2024 will create fiscal drag that will pull more middle- and high-income households into higher-income tax bands. In contrast, the monthly ZAR 350 Social Relief of Distress grant to millions of the lowest-income individuals was extended to 2027.

Our View

The improvement in fiscal projections reflects the one-off use of the GFECRA facility that has softened, rather than eliminated, fiscal pressures. Public finances remain hamstrung by large budget deficits, weak economic growth, and high budget deficits that will cause debt servicing costs as a percentage of total expenditure to continue rising until 2026. Multinationals should expect that after the May 29 election the newly formed government—likely an ANC-dominated coalition—will gradually expand austerity measures by raising corporate, income, and consumption taxes because it will remain focused on trimming public debt and slashing the budget deficits. The government’s capacity to stimulate growth will remain limited, preventing it from raising spending and investment above inflation over the coming years.

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