South Africa Economic Outlook 2023

October 2023


South Africa’s fiscal environment has deteriorated since the publication of Budget 2023 (in February this year), with the last number of months seeing increased concern over the expected shortfall in government revenues during 2023/2024 alongside a deteriorated macroeconomic situation. Budget 2023 expected the South African economy to grow by 0.9% this year and 1.5% in 2024. At present, we forecast lower growth rates of 0.5% and 1.1%, respectively. This is indicative of the multiple headwinds faced by the local economy, including a weak outlook for household finances (linked to a decline in real income) impacting household spending, low business confidence weighing on investment, a decline in global commodity prices reducing export receipts and a weak rand increasing the cost of imports.

In some instances, the fiscal picture is not as dire as initially anticipated. At a sectoral level, PwC’s SA Major Banks Analysis September 2023 found that the country’s four largest banks (Standard Bank, Absa, FirstRand and Nedbank) paid R18.6bn in direct taxes in 2023H1, which was on par with the values seen in 2022H2 and 2022H1. Furthermore, collections of Personal Income Tax (PIT) are holding up well in 2023/2024 so far, and will likely be around R10bn above Budget 2023 estimates, on the back of stronger-than-expected job creation and wage growth.

We expect a total tax revenue shortfall of up to R30bn in 2023/2024. That is a significant improvement over an earlier prognosis — around R50bn — following strong collections (+10.4% y-o-y) of Corporate Income Tax (CIT) during August. While CIT collections have dropped by 15.1% y-o-y in the first five months (April-August) of 2023/2024, this is a smaller margin than previously calculated (-21.7% y-o-y) when data was available up until July. August’s CIT collections were 10.4% y-o-y higher. The month of August is an important one for understanding the CIT landscape as it includes the first provisional tax payments for companies with February year-ends. 


In this edition: 

Fiscal perspectives ahead of the Medium-Term Budget Policy Statement (MTBPS) 

The MTPBS 2023 needs to update fiscal revenue, expenditure and debt forecasts, and specifically comment on how the 2023/2024 funding gap will be addressed. The finance minister has indicated that spending cuts and increased borrowing (not higher taxes) can be expected. PwC also anticipates that the minister will place greater responsibility on the South African Revenue Service (SARS) to improve compliance levels to bolster fiscal income over the medium term. The country’s tax gap (the difference between taxes legally owed and taxes collected) is currently estimated to be more than R300bn. Reducing this by 10% would fund the tax shortfall of R30bn that we have estimated for 2023/2024.

Key content in this report includes:

  • Global context: Many African countries experienced increased fiscal pressures over the past six months. 

  • Local macroeconomic trends: The changing economic outlook from Budget 2023 to MTBPS 2023.

  • Fiscal revenue shortfall: Likely smaller than initially expected after improved corporate tax collections in August.

  • Narrowing the funding gap: Banking on improved tax compliance to improve the medium-term fiscal outlook.

  • In the context of a constrained fiscus, a new public-private collaboration model (which PwC helped develop and implement) allows South African businesses to support the delivery of key public services to their communities. 

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South Africa Economic Outlook | October 2023

PwC's Annual Tax and Economic update 2023/2024

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Contact us

Lullu Krugel

Lullu Krugel

PwC Africa ESG Platform Leader, Strategy& and Chief Economist, Strategy& South Africa

Tel: +27 (0) 82 708 2330