Not much wiggle room for Nene

Finance Minister Nhlanhla Nene. Picture: Sam Clark

Finance Minister Nhlanhla Nene. Picture: Sam Clark

Published Oct 20, 2014

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Finance Minister Nhlanhla Nene is not getting much help from the economy as he prepares his first budget deficit targets since starting in May.

With the slowest economic growth since the 2009 recession curbing tax revenue, the fiscal shortfall will probably widen to 4.3 percent of gross domestic product in the year to March 2015, according to the median estimate of nine economists surveyed by Bloomberg.

That is more than the 4 percent forecast by the government in February.

The gap between government revenue and spending in the first five months of the fiscal year was R111.85 billion, 21 percent more than the same period last year.

The cost to insure debt against non-payment climbed 42 basis points since reaching a 16-month low six weeks ago amid concern a widening deficit could place the sovereign rating at risk. Standard & Poor’s downgraded South Africa to one level above junk in June, citing pressure on spending and weak growth. The economy, forecast in a Bloomberg survey to increase 1.5 percent this year, was hampered by strikes in the first half.

“They are already falling short on tax income, and spending continued. So they will not get close to the previously estimated budget deficit,” Maarten Ackerman, investment strategist at Citadel Wealth Management, said last week.

Nene presents his mid-term budget to MPs in Cape Town on Wednesday. While he has said the government would delay some spending plans to help curb the budget gap, civil servants are demanding pay raises of more than double the August inflation rate of 6.4 percent. - Bloomberg

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