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Economists believe that Minister of Finance Enoch Godongwana did as much as he could to close the mouth of the hippo by making it clear there will be no bailouts for state-owned companies and making progress to close the leaks in the South African procurement system when he delivered his first Medium Term Budget Policy Statement (MTBPS).
During the session in parliament, it also became clear that his party is behind him as they also laughed when he joked.
“He definitely has more support from the ANC than his predecessor had, which is positive because that means he will find it easier to get them to do what has to be done. It was also good to see that he understands what he is doing and has a grip on the country’s finances,” prof. Jannie Rossouw from the Wits Business School says.
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He says Godongwana did the best he could and finds it very important that he actually said there will be no money for state-owned companies, although Sasria gets more money for obvious reasons. Rossouw also liked that he said what will be done and gave deadlines to get it done and that he said the private sector must get involved to grow the economy.
Rossouw is just not happy with the fact that part of people’s retirement funds could become available to them, as South Africans already have such a bad reputation for saving for the future.
Economist Mike Schűssler agrees that Godongwana closed the mouth of the hippo by stating that there will be no more money for state-owned companies, although billions are still going to Eskom, which has been very taxing on our economy.
“He did not have much to work with. I hope it is true what he said about procurement reforms. We are still suffering from the fall-out of state capture, such as paying far too much for coal. It will be great if we could close all the leaks.”
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EY chief economist Angelika Goliger says for the first time in a long time, Treasury has some breathing room and it is no longer the ‘toughest budget ever’.
“However, there are many wolves at the door: global risks, local spending pressures and a feeble economy.”
She says the MTBPS 2021 was sobering and did not dwell on the short-term windfalls from higher commodity prices and better-than-expected GDP growth.
“Treasury is committed to constraining spending and using higher revenue to pay down debt, but noting all of the risks to spending, consolidation plans and the global economy, this is highly uncertain.”
She considers the biggest risks to this outlook to be the wage bill and decisions on the basic income grant.
Bryan Turner, partner at private equity firm Spear Capital, says while it is promising that the minister acknowledges red tape as a problem in the SMME sector, the regulatory blockages do not lie with Treasury.
“It will be up to the relevant departments, including the departments of trade, industry and competition and small business development to remove the regulatory hurdles faced by businesses themselves and the investors that are so crucial to their survival.”
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Sanisha Packirisamy, economist at Momentum Investments, says there were no major negative surprises, with a number of issues left to provide further detail on in the February 2022 National Budget.
“The revenue figures highlighted an overrun in gross tax collections of R120.3 billion, of which R75.5 billion could be attributed to corporate income taxes, likely driven by the previous surge in commodity prices, while R26.2 billion could be attributed to personal income taxes, which is likely the result of a faster-than-anticipated recovery in wage growth.”
She says Treasury rightly pointed out the temporary nature of the commodity price windfall and pledged to avoid committing to new long-term spending in response to temporary revenue windfalls.
“In our view longer term risks to the fiscal outlook remain, including further bailouts to ailing state owned enterprises and additional financing to underperforming municipalities. Although the minister acknowledged the need to consolidate smaller, state-owned enterprises and involve the private sector where strategic relevance is lower for Government, no further headway has been made outside of the example set by South African Airways.”
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The South African Revenue Service (Sars) welcomed the “unflinching commitment to fiscal sustainability, enabling long-term growth by narrowing the budget deficit and stabilising debt.
“Revenue collections have been trending well above the estimate set out in the February 2021 Budget, mainly attributable to the improved economy and endowment effects from previous compliance activities, as well as improved collection efforts by Sars.”
“We remain cautiously optimistic that we will meet the new revenue estimate. Sars is committed to fulfilling its mandate, which is collecting all revenue that is due in order to build a capable state that serves South Africa. This aligns to the higher purpose that Sars serves,” Sars commissioner Edward Kieswetter says.
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