Budget 2023
Share

Moody's: SA's low growth, ineffective SARS affecting tax collections

accreditation
(Picture: Supplied)
(Picture: Supplied)

Moody's has assessed SA's fiscal strength to be moderate, as Treasury has been able to keep spending below the expenditure ceiling.

However, in a research report on SA, released earlier this week, the ratings agency flagged constrained tax revenue collections.

"The collection of tax revenues has been constrained by low growth and the diminished effectiveness of the South African Revenue Service (SARS)," the report read.

Moody's also noted that government debt and contingent liabilities to state owned entities have doubled since 2008/09. At the end of 2017, government debt exceeded 50% of GDP, and contingent liabilities exceeded 20% of GDP, the report highlighted.

There has also been a deterioration in debt affordability. But, the fact that debt is dominated in local currency is favourable, Moody's said. "Moreover, the government actively manages debt and refinancing risk thanks to pre-funding."

As for low growth, the ratings agency observed that weakness in gross fixed capital formation made the "largest negative contribution" to overall growth. This reflects "deteriorating business confidence in overall economic performance", as there have been delays in implementing reforms – regarding land and the mining sector, Moody's pointed out.

Moody's projects growth for 2018 to be 0.5% and 1.3% in 2019.

SA remains on path of fiscal consolidation

Moody's is optimistic that SA will remain on the path of medium-term fiscal consolidation, despite "fiscal headwinds".

"Fiscal headwinds for FY2018/19 and in the medium term primarily stem from slower growth than assumed in the government's original budget plan, which affects tax performance, and a higher-than-expected wage bill," the report read.

"The government still has some flexibility to adjust in the medium-term to meet its target to bring the deficit down to 3.5% of GDP in FY2020/21 (from 4.3% in FY2017/18) and stabilise its debt, at a level that we believe will be around 56% of GDP."

Moody's expects government to miss its original targeted deficit for the 2018/19 fiscal year of 3.6% of GDP, which may possibly be over 4%.

As for the appointment of new Finance Minister Tito Mboweni, just weeks ahead of the mini budget to be announced on October 24, Moody's expects "last-moment changes" in policy implementation.

"We would not expect the broad direction of policy to be dependent on individuals, in particular given that institutions in South Africa have proven resilient to challenges in recent years," Moody's said.

* Visit Fin24's 2018 mini budget hub for all the news, views and analysis.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.0%
Rand - Pound
23.91
-0.0%
Rand - Euro
20.41
+0.1%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.13
-0.0%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders