Finance Minister Tito Mboweni will have to show us the money on Wednesday afternoon when he tables his medium-term budget policy statement (MTBPS) in Parliament. Otherwise he will have to be the strict parent who stops the children’s pocket money, says Mike van der Westhuizen, Citadel portfolio manager .
A lot of cost savings were identified in the supplementary budget and Mboweni is expected to address these, as well as put more colour into the future state-owned enterprises, such as SAA. According to Van der Westhuizen, the government wage bill forms a big part of the cost savings.
“I think the savings on the wage bill are achievable, but the government might have to sacrifice a bit by paying this year’s increase. We can get close to savings of R160 billion and maybe half of the remaining R230 billion,” he says.
The fact is, the finance minister has a juggling act to do and he has to balance the requirements of the growth plan, while stabilising expenditure. Hopefully all the money will not come from taxpayers, but rather cost savings and other instruments such as bonds or public/private partnerships, Van der Westhuizen says.
He sees some scope for a wealth tax, but thinks the administration will be difficult, as people at the top use creative accounting not to pay tax. “A voluntary capital gains tax or taxes on municipal bills where items are zero-rated could also help, but not much. The heavy lifting has to come from savings on expenditure.”
Van der Westhuizen also expects mention of Eskom, but hopes it will not be to offer further support. “it is important not to change the government’s stance on SOEs.”
He says the impact on the consumer of tomorrow’s announcements is tricky. “Much of it is out of the consumer’s orbit, but if the mid-term budget is unsuccessful or poorly received, it could have a negative influence on the rand, which will affect consumers.”