Minister of Finance Malusi Gigaba File photo: ANA
JOHANNESBURG - Following the wave of positive market sentiment after President Cyril Ramaphosa’s State of the Nation (Sona) address, all eyes are on tomorrow’s Budget speech at which the government’s commitment to fiscal discipline and consolidation will once again come under scrutiny. 

Judging by its reaction to Friday’s address, the rand is receptive to the commitment to maintain a sustainable fiscal framework. The currency on Friday reached a three-year high of R11.56 to the US dollar after Ramaphosasaid the government was committed to policy certainty and consistency. He also said that tough decisions would be made to close the fiscal gap, stabilise the country’s debt and restore the health of state-owned enterprises. 

By 5pm, the currency was R11.6881 to the dollar, nearly 5c lower than at the same time on Friday. The all share index fell by 0.71 percent, the Top 40 was down 0.75 percent, while the industrials fell by 1.24 percent. In a report yesterday, treasury services company Treasury One said despite the market’s optimism about Ramaphosa, the financial position of the state was still a concern with a deficit of R50.8billion expected. 

In addition, there was the burden of funding free tertiary education. “The possible ways to finance the deficit are a 1percent increase in VAT, the removal of tax credits for medical aids, an increase in the top tax bracket and leaving the current tax brackets unadjusted for inflation creep. No matter the way implemented, the burden on the taxpayer will increase,” said Treasury One. 

Finance Minister Malusi Gigaba will deliver his first national Budget speech under the watchful eye of international rating agencies. Moody’s in November last year placed South Africa’s rating on review for a downgrade. PwC said yesterday in a note: “In the upcoming fiscal Budget speech, the finance minister must navigate an intricate balancing act between bailing out state-owned entities and dealing with credit rating agencies threatening more rating downgrades.”