By Zandile Makhoba, Economist and Lead Specialist: Research & Insights, Liberty

This year's budget speech is expected to prioritise long-term development objectives, though it comes with the caveat that immediate relief for ordinary citizens may be limited.

Significantly, this is the first budget with a Government of National Unity (GNU) in place and there might be much more negotiation and balance of different perspectives than one might have seen with a clear majority government in place.

This does make it an interesting one to look out for - the post budget responses will reveal a lot about the level of collaboration that is being achieved in the GNU.  The question is what could these compromises be, if any? It is possible that coalition partners will want ordinary people to feel some immediate benefit, so voters will know that they are doing their jobs in the coalition.

Government is focused on rebuilding infrastructure like roads and railways, as well as fixing water supply issues. This will create economic confidence into the future, as we already have seen an increase in investor confidence grow with the fixing of immediate electricity supply issues.

This budget can be characterised as a catalyst for job creation, emphasising long-term infrastructure development that promises to generate numerous opportunities. However, the success of these projects hinges on substantial financial investments. The government will face challenges in securing the necessary funds and will need to explore innovative strategies to enhance revenue collection, which is currently under significant pressure. Certainly, more promising GDP growth might help here.  

Hard taxed consumers and those in the job market can take some comfort in the fact that government is focusing its spending on building up the basics of the economy. But the important message here is that while the positive effects might not be felt straight away, there is the prospect of better future conditions to look forward to.

Individual taxpayers hoping for some relief might find themselves disappointed with this year’s budget because Treasury is trying to manage a deficit due to expenditure growing faster than revenue. One example is the unemployment social security grant of R350 that was meant to be temporary, which has put further strain on available resources.  To mitigate a widening deficit, government will need to maximise its revenue streams which include personal income tax.

This will be similar to 2023, where the Minister might choose not to adjust personal tax brackets, which could lead to further bracket creep. This means some taxpayers who got a raise may find themselves ending up with less because they were actually punted into a higher bracket.  

It's worth reminding ourselves that government is still grappling with post-Covid debt levels and a big wage bill, but is clearly moving towards introducing efficiencies which is positive. Social services, education and health all require a great deal of funding and this year’s budget will need to make further allowances for this to meet its promises of uplifting large parts of the population.

While treasury seeks to optimise revenue collection, consumers will get respite from recent interest rate cuts, now at a cumulative 75 basis points with the 25 point cut in January.

It is feasible that the gains of improved economic efficiency and fiscal prudency will outweigh the current financial burden we carry with personal income tax.