By Lehlohonolo Lehana.
Finance minister Enoch Godongwana will deliver his maiden Medium Term Budget Policy Statement (MTBPS) at 14h00 on Thursday (11 November).
Godongwana is largely expected to continue on his predecessor Tito Mboweni’s path towards fiscal consolidation and growth stimulation.
Economists hope to see the new finance minister prioritise policies that grow the economy and ease SA out of its tight, debt-heavy fiscal position.
Investec chief economist Annabel Bishop said that the focus of markets and credit rating agencies will primarily be on fiscal metrics and whether or not the rand value of borrowings and deficits rise.
“We expect gross loan debt will come out at 70% of GDP for 2020/21, versus the 80.3% of GDP projection in February 2021 Budget. The latter preceded recent revisions to GDP numbers, and the declining ratio was due largely to this, rather than any major drop in borrowings.
“For the current fiscal year, we expect a debt:GDP projection of 69.8% of GDP – 2021 Budget prediction was 81.9% – both on the substantial growth and upwards revision in nominal GDP, with the upwards revision to the size of the economy itself creating a larger base to grow off.”
Bishop said she expects the MTBPS to stick to the fiscal consolidation, growth stimulatory with a move away from accelerating current expenditure.
Citadel chief economist, Maarten Ackerman also does not foresee Godongwana making any big changes to existing budget policies.
“Looking at where we are right now, we don’t really see big announcements regarding tax changes or any other policy changes, so it’s likely to be more of an update, and an indication of what we can expect when the National Budget Speech is delivered in February,” he said.
Ackerman said that the South African economy has rebounded more positively over the past year than had been expected, or budgeted in the February National Budget, partly thanks to the reopening of the global economy supporting strong exports from the local commodities and agricultural sectors.
“This doesn’t mean that we are out of the woods yet, it just appears far better in comparison to the worst of the pandemic.
“What one hopes to see is whether the minister is going to be prudent and use this opportunity to ‘bank’ some of the benefits that we’ve seen, because we are still in a very tight fiscal position and, if we don’t get the economy going very soon, we might have some further fiscal challenges in the next two to three years,” he said.
While economists agree that Godongwana is unlikely to announce any tax hikes and adjustments, the MTBPS should provide some direction as to whether we will see any new taxes come February 2022.
The economists argued that the policy statement should also provide details on the role that Operation Vulindlela has played to facilitate and fast-track reforms.
“The MTBPS will also emphasise public infrastructure investment (although no spending adjustments will be made at this budget), the need to improve business confidence and the importance of crowding in private sector investment (along with the Infrastructure Fund).
“More critically, the key message that this MTBPS could convey is ‘implementation, implementation, implementation’ and the need to do more to support growth and employment creation”.
In this regard, they said the budget will emphasise the necessity of urgent and accelerated implementation of growth reforms, as well as building an efficient and capable state that will work with the private sector to deliver on crucial growth measures.