By Colleen Goko
JOHANNESBURG (Reuters) -South Africa will need to slash spending if its tax agency does not meet its revenue collection target this year, Finance Minister Enoch Godongwana said on Thursday, as the government focuses on keeping rising debt under control.
Godongwana was speaking after making only minor adjustments to the government’s spending plans and deficit projections in a third budget presented to lawmakers on Wednesday.
His two previous attempts were scuppered by disagreements within the ruling coalition – chiefly over now abandoned plans to raise value-added tax – that had rattled investors’ confidence in Africa’s most developed economy.
Speaking to Reuters in an online interview, Godongwana said the government did not expect to overshoot on spending.
He said if the South African Revenue Service raises more than its target of over 1.9 trillion rand ($105 billion) in the fiscal year that ends in March 2026, there will be no need for 20 billion rand in additional taxes pencilled in for the 2026/27 fiscal year.
But if that target is not met, “we will have to cut expenditure substantially,” he said.
Godongwana said the higher debt peak of 77.4% of gross domestic product that featured in his new budget reflected weaker economic growth forecasts rather than extra borrowing.
Debt would peak this year, he maintained, saying doubters predicting further slippage were wrong.
Financial officials will decide in July, after the South African Reserve Bank signs off its accounts, whether to draw on gains in its Gold and Foreign Exchange Contingency Reserve Account, which it started tapping last year to limit borrowing.
Godongwana said friction within the coalition government over the budget had, meanwhile, eased.
“That noise has been exhausted. Everyone now understands we have to get on with the work,” he said.
($1 = 18.0144 rand)
(Reporting by Colleen Goko;Additional reporting by Bhargav Acharya; Editing by Alexander Winning and Joe Bavier)
