JOHANNESBURG - Minister Tito Mboweni yesterday moved to placate rating agencies and the wary investor community, showing the government was committed to stabilising debt and narrowing the budget deficit and the independence of the central bank.
Mboweni, who delivered the 22nd Medium Term Budget Policy Statement (MTBPS), struck a hawkish tone and indicated that he was willing to take a stronger policy stance in the 2019 Budget.
“In recent budgets, we took important steps by reducing the expenditure ceiling and increasing taxes. Given the weakness of the economy, the government is aiming to manage these pressures while avoiding additional fiscal measures that could limit growth,” Mboweni said. The head of the Treasury also said that difficult decisions would have to be made to reignite the ailing economy, currently experiencing its first recession in nearly a decade. “We are at the crossroads. This policy statement highlights the difficult economic and fiscal choices confronting us over the medium term,” charged Mboweni.
Rating agencies have been at pains to warn South Africa’s government that any sign of fiscal slippage would be viewed as credit negative for the country’s ratings.
The state-owned enterprises, which have haemorrhaged the fiscus over the past decade, have also drawn sharp attention from the ratings agencies.
However, the Treasury yesterday strongly hinted at greater private sector involvement in the economy.
Mboweni, who was appointed just over two weeks ago after Nhlanhla Nene resigned over undisclosed meetings with the infamous Gupta family, said cash-burning state-owned entities needed to be restructured.
“Our current challenges with state-owned companies present an opportunity to demolish the walls that exist between the private and public sectors.”
The minister’s posture came after the MTBPS made multibillion-rand provision for further state-owned entities bailouts.
The department said that state airline SAA would receive R5 billion through a special appropriation bill to settle.
An additional R1.2bn will be allocated to South African Express Airways, while the SA Post Office pocketed R2.9bn to reduce its debt levels.
Mboweni also provided more details on the president’s R50bn stimulus packed aimed at dragging the economy out of recession.
Approximately R15.9bn of the outlay will go to infrastructure programmes, while an additional R16.5bn will be reprioritised to various programmes, including funding to restore capacity at the SA Revenue Service after years of mismanagement under suspended commissioner Tom Moyane.
To boost agriculture, the Land Bank will receive a windfall of R16.2bn in the next three years to conclude transactions.
“A significant portion of the funding will go towards export-orientated crops that are highly labour intensive,” Mboweni said.
Mboweni, who previously served as governor of the South African Reserve Bank (Sarb), also called on the incumbent Lesetja Kganyago to keep inflation stable.
“I am confident that governor Kganyago and his team will continue to work tirelessly to keep inflation down
"Let us not distract him with these regular attacks on the mandate and independence of the Sarb.”