On 21 February, Minister Enoch Godongwana will present South Africa’s national budget for 2024/2025. Struggling as we are with our own personal budgets, should we care about the country’s finances? The answer is yes.
The national budget seems far removed from the lives of us ordinary people, but the relationship between the country’s finances and your own is a close one. Her are a few questions and answers to better understand how they fit together.
Where does the government get the money it spends?
From every person living in this country, doing business here, or visiting it as a tourist. The income tax deducted from your pay and other earnings, the VAT you pay when you shop, fuel levies, the tax the company you work for pays – all of that goes into the government’s account. This means that the government spends our money – it is not a business that generates its own income.
Where does the government spend the money it gets?
The budget is allocated to the different government departments to do their jobs. Each department in turn has a budget that sets out how it will spend the money it gets from National Treasury on projects, people and infrastructure. Government also has to ensure that the debt we owe to other countries, institutions and individuals who have invested in or funded the country is repaid. South Africa’s debt burden is huge and consumes a significant chunk of the budget. The minister of finance, through National Treasury, is responsible to ensure that the money is spent appropriately and is not wasted.
What happens when the government doesn’t stick to its budget?
Pretty much the same that happens when you and I ignore our own budgets. If we become indebted to the extent that we cannot pay our debts, we will eventually be blacklisted by banks and we can even be declared insolvent. The government in a similar scenario can also be blacklisted. Ratings agencies will downgrade the economic status of a country to that of junk status. This means that it becomes extremely expensive to keep on borrowing money and, eventually, no other government or international financing institution, will give the country further credit. Yes, it is indeed possible for a country to go bankrupt.
How does the national budget impact my household finances?
The national budget determines how expensive fuel is, how safe we can expect to be (budget for police and defence force), the quality of healthcare (allocation for hospitals, clinics, doctors and nurses), how well our children will be educated (money for schools and teachers) and if we will have water and electricity or not (infrastructure spending). The biggest direct impact, however, is in income tax. When governments need more money, they “charge” their citizens more by increasing the tax rate. Your income tax bracket has a direct impact on your take-home pay every month.
We must remember that the government is made up of people just like us. They make decisions every day on how to do their jobs – which influences how our taxes are spent and how much value we get from them. In effect, you and I “pay” the government to provide us with the services and infrastructure we need to live our lives and be happy, productive citizens. The government spends the money we work hard to earn, and we have to hold officials to account and not allow wasteful expenditure and/or corruption. The government spends the money we work hard to earn, and we have to hold officials to account and not allow wasteful expenditure and/or corruption. This why we are all encouraged (and. expected) to vote in this year’s general elections. Visit the Independent Electoral Commission’s website (Voter information center – Electoral Commission of South Africa (elections.org.za) for information on the voters’ role and how to vote.
