Johannesburg - Minister of Finance
Pravin Gordhan's third medium-term budget policy statement (MTBPS) on Tuesday highlights that servicing debt is emerging as the fastest growing cost for government.
This comes amid news that the fiscal gap would rise to -5.5% in 2011/12 and gross domestic product was being revised down to 3.1% from the 3.4% expected in February.
There was mixed reaction from analysts.
Peter Attard Montalto, Nomura
Overall there is a conundrum at the heart of the budget. The deficit forecasts look far too optimistic, given both future spending requirements on the new growth plan and from wages and investment but also on the revenue side as well - even given lower growth forecasts. Add in NHI (beyond the low cost pilot scheme within the MTBPS) and the risks start to become apparent.
Equally the revision down of the non-central government funding requirement looks odd, given the demands on these institutions and no additional money from the centre. However, the drawdown of cash looks to be the preferred strategy for now and is a tacit acknowledgement that really there is virtually zero extra room for additional borrowing.
The response to additional fiscal slippage looks to be very difficult, both politically on the revenue side for raising taxes etc, and on the borrowing side too. The treasury may well have had little choice then but to have announced what they did today, though we remain more bearish on the deficit going forwards.
Freddie Mitchell, independent economist
He surely focused on the right thing, that expenditure of government has to be contained, and you can't be too excessive with the situation in Europe. "Five million jobs" is a great thing to say, but you must contain expenditure and focus on infrastructure development in the medium term. So that's great news.
Nicky Weimar, senior economist at Nedbank
A decline on the revenue front shows that the economy hasn't grown as much as they (finance ministry) had hoped. And although there is a bigger deficit than anticipated, it's not a train smash.
And though the numbers overall are worse than expected, it's not all that bad. They (ministry) are making all the right noises around fiscal prudence.
Mike Schüssler, economist at economists.co.za The fact that the deficit didn't go above 6% is a positive. Gordhan is doing a good job but his problem is that he's getting to the point where the area to move is becoming very tight.
The main things he pointed out are that inflation will be higher than he had expected and growth lower and we're clearly going to see more room for tax rises than cuts. There wasn't a lot of information on the national health insurance scheme - it's still a pilot project.
JSE reformsThe JSE has welcomed proposals in the mini budget that local investors will be able to trade in foreign-domiciled companies where they were previously restricted by prudential limits, and that the exchange will be able to include these companies in domestic indices.
The bourse said it appreciated "the thoughtful and careful manner" in which the National Treasury and the Financial Services Board had engaged on this issue, which clearly had an important impact on the markets.
JSE CEO
Russell Loubser said: "The positive move provides a further boost for the reputation of the country's markets, by enabling the JSE to more aggressively pursue a wider range of investment possibilities. It will take time to work through the practical steps to implement this and we will make an announcement in due course."