CAPE TOWN/JOHANNESBURG/DURBAN – Finance Minister Tito Mboweni is set to deliver the most crucial Medium-Term Budget Policy Statement (MTBPS) in years.
He will take to the podium in Parliament at 2 pm on Wednesday.
He will be presenting his speech on the back of skyrocketing government debt that is expected to reach 60% of GDP if no urgent intervention is implemented, as well as a 29.1% unemployment rate, with low business confidence and no agreement between the government and its alliance partners on how to proceed.
It’s not so much about the tightrope Mboweni has to walk on Wednesday afternoon, it’s whether there is any rope left at all.
“There are things that government can do. So, for example, as everyone’s pointed out on the visa and skilled immigration side, those could change virtually overnight,” said Nedbank’s chief economist Dennis Dykes.
But Dykes said nothing had really moved since President Cyril Ramaphosa announced the plans almost two years ago.
“So, there really are some levers that government can pull, but it’s not totally in the finance minister’s remit. The other ministries are holding things up, basically.”
Ratings agencies will be watching closely on Wednesday as well.
“Moody’s knows there’s no magic wand that can be swung around, but what all the ratings agencies want is to actually see that we’re on a path that will lead to some sort of growth solution. Because the only way out of this is economic growth. We have to get growth back up to at least 3%. Failing that, there’s no way, no matter how you cut and slice and dice this, that we’ll get out of our difficulties.”
SUGAR TAX JOB LOSSES
There are calls for Mboweni to cut the sugar tax as he prepares to deliver his MTBPS.
Government implemented the tax in April last year to promote healthy living.
While its generated over R3 billion in revenue in the last financial year and has been widely welcomed by health advocacy groups, the sugar industry said it led to job losses.
The South African Canegrowers Association and the South African Farmers Development Association said their members were losing business due to the sugar tax.
They urged Mboweni to scrap it until a full-scale socio-economic assessment has been conducted.
“Sugar cane farmers are standing together today to ask Finance Minister Tito Mboweni to halt the sugar tax. It’s had a crippling effect on the industry. It cost approximately R1.5 billion loss in revenue since its inception in April 2018 and a loss of about 9,000 jobs in deep rural areas,” said chairperson of the South African Canegrowers Association Rex Talmage.
Talmage said the sugar industry had already been crippled by weak protection against cheap imports, drought and falling sugar prices.
He said the sugar tax, if not reconsidered, would destroy an industry that supports over one million people in the country.
ECONOMIC STRATEGY PAPER
Mboweni is also expected to release a finalised version of Treasury’s August economic strategy paper during his speech, but economists have raised concerns.
While the focus has been on what measures government will enforce to reduce the country’s debt, political economist Patrick Bond believes this is not necessarily a problem.
Treasury’s draft strategy document highlighted that high inflation, unsustainable debt levels and volatility in exchange rates and financial markets can undermine the economy’s ability to transform and grow in an inclusive manner.
Meanwhile, the International Monetary Fund advised during a field visit to South Africa this winter that the subdued economic growth could be reignited if the pace of structural reform implementation accelerates.
The organisation also raised concerns with the fiscal deficit, which Bond said could reach 5% and the increase in public debt.
The Centre for Development Enterprise also rang the alarm about the dire consequences of the country’s debt recently, saying government could be forced to abandon service delivery targets in order to continue servicing it.
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