JOHANNESBURG – Finance Minister Tito Mboweni gave the country a true picture of its finances in a frank Budget Speech that sought to appease investors and rating agencies.
Mboweni said the government expected the economy to grow below the elusive 2 percent this year, but insisted public debt would be reined in.
He said the economy would grow 1.5 percent in the current financial year and inch up slightly to 2.1 percent in 2021.
Mboweni anchored his speech on fiscal consolidation and major measures to address state-owned entities (SOEs) and the ballooning public sector wage bill.
He said the government was prioritising resources towards the president’s infrastructure fund and away from the wage bill.
“The infrastructure fund is a central pillar of the budget and of reprioritisation,” he said.
“It will accelerate R526 billion worth of on-budget projects by bringing in the private sector and development finance institutions.
“In addition, the government will commit R100bn over the next decade.”
Mboweni walked a fine line between arresting the debt and providing further support for government programmes.
He refocused R27bn from the public sector wage bill towards providing a R69bn buffer for Eskom.
Mboweni refused to swop R100bn of Eskom’s debt into the government’s balance sheet.
Simon Harvey, a foreign exchange analyst at Monex Europe, said the impact on government debt limited by increasing tax revenues made the outcome from Moody’s less certain than initially thought.
“The measures represent a credible reaction by the government, that had to walk a tightrope between the fiscal risks of an unconditional bailout and the political backlash from job-cutting prior to this year’s elections,” Harvey said.
Moody’s, which is the last of the three big rating agencies to leave South Africa’s credit rating at investment grade level, is expected to provide its rating review next month.
Mboweni also stressed that financial support for SAA, Denel and SABC would be conditional on them selling their non-core assets.
He said contingency reserves would be increased to R13bn to accommodate further bailouts of SOEs.
However, Mboweni also delayed reform announcements to SOEs in a move seen to avoid rocking the boat in an election year.
Old Mutual Investment chief economist Johann Els said the Eskom and public sector wage bill announcements, as well as the tone of the speech, were positive.
“This should help stabilise confidence and help create an enabling environment for further policy measures. I expect the bond and equity market to eventually view the Budget as neutral,” Els said.