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No reference is made in Finance Minister Tito Mboweni's mini budget about steps that would address record high fuel prices, apart from a pledge that taxes and levies in general will not rise by more than inflation going forward.
This was the consensus in post-budget comments made by PwC experts Lullu Krugel, Christie Viljoen and Maura Feddersen.
They said Mboweni's speech was themed around the five pillars of President Cyril Ramaphosa’s economic stimulus and recovery plan. These five themes are the implementation of growth-enhancing economic reforms; reprioritisation public spending to support job creation; the establishment of an infrastructure fund; addressing urgent and pressing matters in education and health; and investing in municipal social infrastructure improvement.
Other broad priority areas include improving governance and financial management at all levels of government; reforming state-owned enterprises (SOEs) and improving their financial health.
Ratings risk
Jabu Mabuza, co-convenor of the CEO Initiative, emphasised that any increase in the government’s borrowing levels is a significant risk to SA’s sovereign credit ratings outlook, which urgently needs to improve to create an environment in which sustainable and inclusive growth can be achieved.
"It is particularly concerning that one of the major drivers of government expenditure is the rise in the compensation bill.
"However, we commend the Minister for not allocating additional funding in this regard," he says.
Arthur Kamp, economist at Sanlam Investments, commented on the mini budget by saying that, overall, years of fiscal revenue underperformance and excessive expenditure linger in the fiscal numbers and risk remains elevated.
"It’s no easy task to stabilise the debt ratio in the absence of a decline in expenditure relative to GDP. In turn, cutting spending is no easy matter considering South Africa’s high unemployment rate," said Kamp.
Balance sheet under strain
"Also, there are latent risks in non-financial public enterprises and corporations. The state’s balance sheet remains under strain. And without a marked improvement in the primary budget balance, the fiscal maths is not adding up to a stable debt ratio yet. That implies the risk related to sovereign debt ratings is back."
Isaah Mhlanga, executive chief economist at Alexander Forbes, expects Moody’s to change the outlook of SA's Baa3 sovereign credit rating, from stable to negative, at the very least, with a potential downgrade after the 2019 Budget, if significant measures are not taken.
For Frans Cronje, CEO of the SA Institute of Race Relations, most key indicators are headed in the wrong direction. Debt, the deficit, spending, tax, growth and revenue all face downward or negative revisions.
For him there was no indication in the mini budget of a willingness to embrace appropriate reforms.
"Fiddling while Rome burns comes to mind and the negative knock on for social and political stability will be considerable," said Cronje.
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