Budget speech 2024 | Government boosts taxes and social spending

CAPE TOWN - South Africa plans to hike taxes and increase spending on social grants amid sluggish growth and high debt, the government said Wednesday.

The treasury announced increases in income tax as well as alcohol and cigarettes duties as part of a national budget.

"South Africa's economic performance has been weak, and difficult decisions are needed to make sure the economy grows and creates jobs," Finance Minister Enoch Godongwana said.

But the budget also provides more money for social handouts.

WATCH: Discussion | 2024 Budget Speech | Grant increases for recipients

This expenditure will increase by R42-billion over the next three years to keep pace with inflation and increase access for the eligible population, the treasury said.

Almost 20 million people -– about a third of the population –- will receive social grants by March 2027, it said.

The government was sensitive to the increase in the cost of living for the millions of South Africans who rely on these grants to make ends meet, Godongwana told parliament.

Excluding interest payments, about 60 percent of the budget went to fund social services, including public employees' salaries, he said.

Personal income tax will be increased by not adjusting the tax brackets for inflation.

Duties on alcohol and tobacco products are instead to rise by up to 7.2 percent and 8.2 percent respectively.

South Africa is also to implement a "global minimum corporate tax" targeting multinational corporations with a 15 percent levy regardless of where their profits are located.

Along with other cost-cutting measures and reforms on the use of valuation gains from foreign exchange reserves, the hikes are projected to help bring down the deficit from 4.9 percent of GDP this fiscal year to 3.3 percent in 2026-27.

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Government spending over the same period is to increase by almost 10 percent to R2.6-trillion.

Debt is expected to peak at 75.3 percent of GDP in two years, Godongwana said.

South Africa is to achieve a primary budget surplus, meaning revenue will exceed non-interest expenses, for the first time in 15 years by the end of March, the treasury said.