Budget 2024 avoids direct tax increases but a lack of inflation adjustments to Personal Income Tax brackets will indirectly extract more taxes from households
23 Feb, 2024

Lullu Krugel, PwC South Africa Chief Economist and Mbai Rashamuse, PwC Southern Africa Tax and Legal Services Leader


National Treasury is positive about economic growth, expecting structural reforms and interventions in energy, logistics and safety to boost business and investment sentiment


Johannesburg, 21 February 2024 — Minister of Finance Enoch Godongwana delivered his Budget Speech 2024 to Parliament and the nation on 21 February.


A key announcement was that tax rates will not be increased in 2024/2025, as previously signalled by the Medium-Term Budget Policy Statement (MTBPS) 2023, to generate the extra R15bn needed in revenue. Instead, National Treasury will extract more direct taxes from the economy – and from households in particular – by not making inflationary adjustments to the Personal Income Tax (PIT) brackets and medical aid credits.


Mbai Rashamuse, PwC Southern Africa Tax and Legal Services Leader, says:


“While Budget 2024 has avoided directly increasing tax rates in search of an extra R15bn in revenues, tax rates are being indirectly increased by not making inflationary adjustments to PIT brackets. Keeping the PIT brackets unchanged alongside inflation adjustments to workers’ income results in a component of the labour force moving into higher tax brackets and therefore paying more PIT. This increases the burden of taxes on the average South African.”


National Treasury signalled optimism in Budget Review 2024 about economic growth over the medium term, forecasting an average real GDP growth rate of 1.6% p.a. during 2024-2026.


Lullu Krugel, PwC South Africa Chief Economist, says:


“National Treasury forecasts average economic growth of 1.6% per annum in 2024-2026. This shows their faith in the momentum of key structural reforms as well as interventions currently underway to address challenges in energy, logistics and public safety. The private sector is assisting Government in addressing these challenges, with 2024 being the year where tangible results will have to be delivered to boost business and investment sentiment to the levels needed to accelerate economic growth. However, we need a faster rate of growth than 1.6% p.a. beyond 2026 to really change the trajectory of the South African economy and to keep up with population growth.”  



The following table reflects some of our key expectations for Budget 2024, and compares them to what was actually announced in the budget speech:


Topic PwC expectations Budget 2024
Economic growth It is likely that National Treasury will make a notable downward revision to its economic growth predictions in Budget 2024 following disappointing GDP data released in December for 2023Q3. The MTBPS 2023 predicted economic growth of 0.8% in 2023, 1.0% in 2024 and 1.8% in 2025. National Treasury reduced its forecast for economic growth in 2023 to 0.6%. Conversely, National Treasury now expects an economic expansion of 1.3% in 2024, and an average growth rate of 1.6% p.a. during 2024-2026. This optimism is underpinned by expectations of less load-shedding, lower inflation, as well as improved fixed investment and business sentiment.


PwC perspective: Economic growth forecasts  – both by the public and the private sector – have over the past decade been too frequently  optimistic. The attainment (or not) of these growth projections will be influential on fiscal revenue dynamics over the medium term.

Tax revenue MTBPS 2023 forecast tax revenues of R1.731bn in 2023/2024. We expect revenue collections to be broadly in line with this estimate. While PIT should perform above expectations, these higher revenues are expected to largely be offset by lower-than-estimated revenues for Value-Added Tax (VAT), customs duties and excise duties. In line with PwC’s expectations, Budget 2024 reflects expected revenues of R1.731bn in the 2023/2024 fiscal year. VAT collections will be R26.1bn lower than expected a year ago due to: 1) high refunds linked to increased investment in renewable energy and 2) the use of more expensive road transport due to operational and maintenance failures in the rail network.
Tax increases Tax rates have been stable since 2020 and increasing taxes to boost fiscal revenues would be a last resort for the minister. However, if National Treasury delivers on a warning in MTBPS 2023 that it needed to increase taxes towards raising an additional R15bn in revenues, we expect changes to either PIT or VAT. This would entail an upward adjustment of 0.5 percentage points. Budget 2024 has avoided directly increasing tax rates in search of the R15bn in extra revenue. Instead, R18.2bn will be collected by making no inflationary adjustment to PIT brackets (R16.3bn) and medical tax credits (R1.9bn). Some relief will be provided elsewhere, including R4bn given back to the economy by making no adjustments to the general fuel levy for a third consecutive year.


PwC perspective: Tax rates are indirectly increased by not making inflationary adjustments to PIT brackets. Keeping the brackets unchanged alongside inflation-related adjustments to workers’ income results in a component of the labour force moving into higher tax brackets. This includes workers previously falling below the tax exempt threshold.

Budget balance (% of GDP) With expected revenue in line with MTBPS 2023, National Treasury has retained its 4.9% of GDP projection for 2023/2024. It also marginally improved the outlook for 2024/2025 with a projected budget deficit equal to 4.5% of GDP (4.6% previously).


PwC perspective: While forecasts point to a continued decline in the budget deficit over the coming year, this will be dependent on National Treasury’s optimism about economic growth translating into stronger tax revenues alongside expenditure prudence. Both economic growth and expenditure restraint have downside risks and would put pressure on the ability of National Treasury to achieve these numbers.

Debt transfers The national debt burden is at risk of increasing further due to possible transfers of state-owned enterprise (SOE) debt to the sovereign balance sheet and the further guaranteeing of SOE debt. We expect that the minister will announce progress in the amount of debt that has been transferred and newly guaranteed, whether guarantee conditions have been met, and what actions have been taken with regard to SOEs that are not meeting the set conditions. Budget Review 2024 reports that Government’s exposure to debt guarantees declined by R16.7bn (3.9%) in 2023/2024 largely due to an easing in exposure associated with Eskom and SANRAL. At the same time, exposure to Transnet increased by R5.0bn alongside a new guarantee of R47bn announced in December 2023. The Eskom debt-relief arrangement remains on schedule to conclude in 2025/2026, with R70bn of the utility’s debt being transferred in that year to the sovereign balance sheet by switching selected debt instruments into government debt.
Social Relief of Distress (SRD) Grant Current provisioning for the SRD is set to expire in March 2025. What has been suggested is to develop the SRD grant into a basic income grant (BIG). However, the challenge is: at what level (value) to peg the BIG and how to fund it. President Cyril Ramaphosa said in his State of the Nation Address (SONA) 2024 that the SRD will be extended and improved towards income support for the unemployed, setting up Budget 2024 to provide more information. Funding for the SRD remains in place for 2024/2025 but with no allocation pencilled in for the next year. An annexure to the Budget Review 2024 containing a report of the finance minister to Parliament states that National Treasury and the Department of Social Development should within 60 days of the adoption of this report by Parliament “develop clear measures and timeframes to conclude the review process of the entire social grant system”. This would include clarification on the potential conversion of the SRD into a BIG.
National Health Insurance (NHI) The NHI was passed by the National Council of Provinces (NCOP) in 2023 and awaits President Ramaphosa’s signature. Among the criticisms levelled against the act is alleged the lack of information on where funding will come from for the scheme. The Department of Health has said that medical aid tax credits will be eliminated to help fund the NHI. National Treasury needs to provide clarity on this and other potential funding mechanisms. Budget 2024 is silent on NHI funding. Apart from noting R6.9bn in direct and indirect national health insurance grants allocated to provinces over the next three years, no insight is provided on the long-term funding of the NHI scheme.


PwC perspective: While the relevant legislation is not yet in effect, some comment on NHI funding was anticipated given the potentially large impact this could have on future revenue and expenditure dynamics.

Climate change The recently approved Climate Change Bill included the adoption of a finance mechanism to support South Africa’s climate change response. The minister is likely to indicate incentives for the motor manufacturing sector and climate transition initiatives, although comprehensive funding may not be indicated in this budget. To encourage the production of electric vehicles, Budget 2024 proposes that automotive manufacturers can, from March 2026, claim 150% of qualifying investment spending on production capacity for electric and hydrogen-powered vehicles in the first year of investment.


PwC perspective: It is encouraging for automotive producers and the country’s just energy transition that the minister has announced this incentive after several years of engagement with the industry and several delays in making an announcement on Government support measures.

Energy (solar power) In Budget 2023, National Treasury provided incentives for rooftop solar energy installations by businesses and individuals. Businesses have invested quite significantly in alternative energy over the past year. PwC expects the minister will reflect on the success/uptake by businesses of the incentive scheme and what this has meant for the country’s energy security. However, we do not expect extensions to incentives given fiscal constraints. In line with PwC expectations, no announcement was made to extend the rooftop solar energy incentives. Budget 2024 reflected on the success of the program, which supported the installation of solar panels that now generate 5,200 MW of electricity for households and businesses.


PwC perspective: The rooftop solar capacity added under this incentive is saving the country from an estimated one to two stages of day-time load-shedding at present.






@Lullu Krugel, PwC South Africa
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@Mbai Rashamuse
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