South Africans have high expectations for the upcoming mid-term budget speech
JOHANNESBURG - Despite President Ramaphosa’s high profile courting of investors to kickstart the economy, South Africans are expecting immediate and tangible feedback on the ANC’s growth plan from Finance Minister Tito Mboweni in his upcoming Medium-Term Budget Policy Statement.
Recent events have affected the belief that the country is heading in the right direction, showing a downswing of 4%, dropping from 35% in Q1 down to 31% in Q2 2019.
A significant contributor to this decline has been the growth in unemployment which has reached its highest levels since 2003.
The current sentiment is still significantly higher than at the end of 2018 heading into the beginning of 2019.
The May National and Provincial Elections contributed to a significant rise in optimism, reaching levels comparable to the “Ramaphoria” period in Q2 2018. The momentum coming out of the elections, however, seems to be waning.
The South African Citizens Survey (SACS) revealed that, in February, 46% or 17.4-million South Africans were aware of the Budget Speech.
Of those, 53% or 10.9-million said that the budget speech made them feel positive about the direction in which South Africa is heading.
Minister Mboweni’s favorability rating has been declining significantly from 35% in June to 29% in July, followed by a further drop to 26% in August. He has a difficult path ahead.
If he wants to forge the path to long-term growth, he will need to pay attention to the issues that are truly important to South Africans at present.
Citizen Survey’s results from their Quarter 3 (Q3) 2019 South African Citizens Survey (SACS) have revealed the following key insights which highlight the current priorities of South Africans:
The SACS monthly data shows that people are concerned about Eskom, and therefore it is likely that Minister Mboweni will address this in his speech.
The public’s trust in Eskom declined from 56% in January to a low of 35% in April 2019 as the consequence of Eskom implementing load shedding in February and March.
However, between April and July 2019, trust in Eskom went up from 35% to 55%, due to a lull in load-shedding. However, on 23 July, Minister Mboweni tabled a special appropriation bill to provide an additional R59bn to bail-out Eskom over the next two years. As a result, we saw August’s trust in Eskom drop to 45% as South Africans were told to foot the bill.
Further compounding the problem is the current recommencement of load-shedding, adding insult to injury.
South Africans will be expecting Mboweni to address concerns around tax revenue. The SACS data has revealed that the ‘trust in SARS’ is currently on a decline.
Trust in SARS declined by 3% in Q3 2019 after reaching a twelve-month high in Q2.
SACS asked respondents if they thought that withholding tax payments is a legitimate form of protest against the government. 64% disagreed stating that it’s “wrong and that those who do should be punished under law”, however 23% sympathised with those who refuse to pay and approximately 10% stated they would also do so if they had the chance, more than doubling since the beginning of 2018.
It’s not just tax compliance that is a concern. According to a recent statement by Momentum Investment economist Sanisha Packirisamy,“There is a growing concern that the country has approached its limit on advancing tax revenue collections through further tax increases for taxpayers. The Laffer Curve – the relationship between tax rates and the amount of tax revenue collected by governments – suggests at some point, further tax increases will eventually lead to lower tax revenues being generated as the disincentives of higher taxes start dominating collections.”
The data shows that unemployment is the biggest problem facing the country, and education is a key long-term solution.
78% of adult South Africans believe that unemployment is the biggest issue facing the country – a growth of 5% from Q2 2019. This is followed by Crime, which has grown from 29% in Q2 to 39% in Q3.
The Budget Speech will need to address the problems of unemployment, crime and poverty and destitution which have been adversely impacted upon as a result of a stagnant economy.
Reza Omar, Strategic Research Director at Citizen Surveys, said, “As the medium-term budget sets out government’s priorities for the next three years, it’s not surprising that millions of South Africans will be paying attention to Mboweni’s proposals.”
“There are many factors that need to be carefully considered. With the decline in tax collection contributing to a revenue shortfall of R50.8bn, accompanied by the fact that billions are required for both the Eskom and SAA bailouts (during a time of an ailing economy and high unemployment), Mboweni will need to tread carefully to keep the South African public happy, and the Moody’s rating stable,” Omar concluded.
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