Finance Minister Malusi Gigaba

By MTHULISI SIBANDA
JOHANNESBURG – AMID pessimism by experts, South Africa’s focus will on Wednesday be on Finance Minister Malusi Gigaba’s presentation of his first Medium-Term Budget Policy Statement (MTBPS) .
Wednesday’s budget in Parliament, also set for scrutiny by credit rating agencies, is projected to show the largest widening fiscal deficit relative to February budgets since 2009, at the peak of the global recession.
Rand Merchant Bank’s Global Research anticipated a “terrible” budget.
“On the local front, we expect a terrible budget on Wednesday. Simply put, there are no more rabbits to pull out of the hat,” the firm’s Currency Strategist, John Cairns, and Economist, Isaiah Mhlanga, said.
The experts forecasted the headline 2017/18 budget deficit to be revised to 4,1 percent of gross domestic product from the February target of 3,1 percent, which is the largest slippage for a current fiscal year relative to February budget projections going back to 2009.
“This puts us at the high (worst) end of expectations,” the RMB experts continued.
“What’s more, on a cross-country comparative basis, South Africa will have the second-largest budget deficit as a percentage of GDP in the EM (emerging markets) universe this year.”
Cairns and Mhlanga said this would have credit rating agencies raise concerns but they doubted the agencies would lower the credit rating before the end of the year.
“They will likely wait for the announcement of tax revenue raising measures, which are typically in the February Budget Review.”
Absa Capital economists Miyelani Maluleke and Peter Worthington said “with no easy answers” to South Africa’s significant fiscal challenges, Gigaba would struggle to present a credible and reassuring midyear budget update.
“We think Finance Minister Gigaba will struggle to convince the markets that he has a credible plan to address South Africa’s significant fiscal challenges. Tax collections are faltering and a large fiscal slippage is likely, in our view,” they stated.
Nedbank economists Busisiwe Radebe and Dennis Dykes concurred  Gigaba’s first budget presentation came at a particularly “difficult time” as revenues are known to have under-performed significantly without a similar decline in expenditure.
“The market will be looking to the Finance Minister to chart a credible way forward by boosting growth, finding new sources of revenue, restriciting spending and meaningfully addressing the problems stemming from wasteful expenditure on the part of state owned enterprises,” they said.
Standard Bank Fixed Currency Strategist, Zaakirah Ismail, said “Any deviation from the intention to compress the budget deficit would be punished by both the bond and currency market.”
Meanwhile, Agri SA said given the ailing economic environment, Gigaba was under intense pressure to reassure ratings agencies.
“The minister needs to ensure that the economy can grow at a rate which can lead to sustained job creation,” the organisation said.
“Wasteful expenditure, for example, supporting poorly managed state-owned enterprises should be minimized,” Agri SA urged.
Agri SA is looking forward to the MTBPS making adequate resources available to boost agriculture’s competitiveness and to support farmers, especially in the drought affected areas including Western, Northern and parts of the Eastern Cape.
“This will help the sector to continue producing quality food for the country and contribute towards job creation and poverty alleviation, as envisaged by chapter six of the National Development Plan (NDP).”
– Guardian