FINANCE Minister Pravin Gordhan is set to present what many view as his most important mini-budget yet in Parliament tomorrow afternoon.
The eyes of investors, analysts and rating agencies from around the globe will be on the minister while he presents what is colloquially called the mini-budget at a time when the economy is under huge strain and he is facing his own legal battles.
Gordhan, who took up the role for the second time last December after Nhlanhla Nene was unceremoniously sacked and replaced with the unknown Des van Rooyen for all of four days, is set to appear in court next Wednesday on charges of fraud.
Gordhan has been accused of costing the country R1.1 million through his approval of early retirement for former SA Revenue Service deputy commissioner Ivan Pillay, who was then hired back as a consultant.
He has also been implicated in the creation of the so-called rogue unit at the South African Revenue Service.
However, the typically stoic finance minister is not likely to touch on any of these issues either during his speech or in the preceding media conference. Instead, he will likely stick to the task at hand – which includes boosting growth, trimming debt and saving SA from a ratings downgrade in December.
SA is at risk of losing its investment-grade credit rating as S&P Global Ratings and Fitch Ratings, which put South Africa a notch above junk, are due to review their assessments by the end of the year. Moody’s – the other big three agency – has SA two levels above junk but is also set to review the grade in December.
A cut to junk status will make it more expensive for SA to borrow money, and will also adversely affect foreign direct investment, which the country desperately needs.
One of Gordhan’s biggest challenges will be trimming debt as well as the budget deficit: the difference between what the economy is worth and what SA Inc spends.
In February, Gordhan projected the shortfall would come in at 3.2 percent by the end of the fiscal year, but Bloom- berg has reported that, based on a survey, the shortfall may be 3.4 percent of gross domestic product.
In his 2016 Budget speech, Gordhan said the budget deficit will fall from 3.2 percent of GDP in the 2016/17 year to 2.4 percent in 2018/19.
Gordhan is also likely to indicate whether taxes will go up in February as the Mid-Term Budget Policy Statement is not when these announcements are made, but rather a time to look back at he first half of the year and adjust spending based on priorities.
As such the #FeesMustFall movement may score a victory if money is shuffled away from other departments into Higher Education.
Gordhan also has to deal with an economy that will grow at less than a percent this year – which is a far cry from what is needed to create jobs.
Consequently, he may provide stimulus to business, especially small and medium enterprises.
In addition, more belt-tightening by government is likely to come through in the speech, along with a heavy hand on corruption so that South Africa gets the most out of what is being spent.