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Johannesburg - Can government curtail its expenditure? This is the big question posed by observers that Pravin Gordhan has to answer in his Budget speech on Wednesday.
It will be his first Budget speech and could hardly be a more challenging one.
His major headache is the Budget deficit.
In October in his medium-term Budget framework (MTBF) he already predicted a deficit of 7.6% of the gross domestic product (GDP), or R183.8bn for the year to end-February. This deficit is almost 22% of the country's Budgeted expenditure of R841.4bn.
Nedbank predicts that the deficit could run to as much as 7.8% of GDP, or R191.2bn - double that Budgeted for last February.
For the new fiscal year Nedbank expects a deficit of 6.5% of GDP, or R174.8bn.
Government expenditure in the nine months to end-November was however already 19.7% higher than in the previous comparative period, mainly because of increased hiring by the public service, higher salaries in education and healthcare, as well as rising social grants.
The legacy of the unusually high salary settlements in the public service will, according to André Roux, head of Investec Asset Management, put Gordhan under even more severe spending pressure.
In the current financial year the South African Revenue Service collected almost R70bn less than Budgeted for.
Although the expectation of economic growth could mean higher tax revenue from personal income tax, VAT and company tax, Sanlam chief economist Jac Laubscher warns that state revenue in the current fiscal year could be even less than predicted in the MTBF.
Laubscher also cautions that the proposed national health insurance system - and subsequently a national social security system - could involve massive expenditure items with serious financial implications.
Nedbank says that the risk is that government could "save" by cutting expenditure on infrastructure and other capital items, which would be counterproductive as it would reduce the economy's future ability to grow and create jobs - and thus restrict the tax base and increase dependence on government and the burden on the state.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.