At the end of what Finance Minister Tito Mboweni has described as a ‘long hard winter’, the economy is worse for wear with muted growth sharply undercutting tax revenue projections. Unemployment continues to rise while national debt and debt servicing costs have increased.
Eskom and other SOEs
No plan announced on Eskom’s debt restructuring
Government has committed to the roadmap to unbundle the power utility into three subsidiaries comprising generation, transmission and distribution by 2022
Government will take a step back, allowing Eskom’s management to fix the utility
Conversations have begun involving SAA and potential equity partners
Economic growth
National Treasury has downgraded its growth projections for 2019 to 0.5% from 1.5% in February.
Revenue
National Treasury expects a tax revenue shortfall of R53 billion in 2019/2020, driven by weak economic growth which led to downward adjustments in income expected from personal income taxes, value added tax and company income tax
Significant tax increases over the past several years have left a moderate scope to boost tax revenue at this time
Fiscal famework
In 2019/20, the main budget deficit is estimated to widen to 6.2% of GDP, compared with the 2019 budget estimate of 4.7%, mainly due to lower nominal GDP, tax revenue shortfalls and financial support for Eskom
With the bailouts to Eskom, the country’s debt-to-GDP ratio is expected to grow from the 56.2% for 2019/20 estimated in the February budget to 60.8%, 57.8% versus 64.9% in 2020/2021 and 58.9% vs 68.5% in 2021/2022
National debt exceeded R3 trillion this year. It is expected to rise to R4.5 trillion in the next three years
If the status quo remains and government makes no policy adjustments, debt will most likely exceed 70% of GDP by 2022/23
National Prosecuting Authority
The NPA will receive an additional R1.3 billion for the 2019/20 to 2022/23.
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