Tito Mboweni, takes his oath of office after being appointed minister of finance on October 9, 2018, at the Tuynhuys parliament compound in Cape Town.(Rodger Bosch / AFP) ~ AFP
New Finance Minister Tito Mboweni will stick to the script laid out by his predecessor Nhlanhla Nene when he delivers the mini budget later in October, according to tax experts.
At a panel discussion on Thursday about the medium-term budget policy statement, tax specialists from auditing, accounting and consulting group Mazars shared their expectations.
Mboweni will deliver the mini budget in Parliament on October 24.
'Months of planning'
Senior tax partner Bernard Sacks said that it would not be a matter of simply writing a speech and delivering it.
"The speech and documentation behind the speech are based on months of careful planning by a dedicated team at National Treasury," he said.
"Having a new minister on board two weeks prior is unlikely to have a marked effect on the mini budget."
Although the changes are disruptive, Sacks is confident that the team at Treasury is professional and have put together the "best policy statement".
"I don't think we will see significant changes, arising from the appointment of Mboweni, in the document," he added. Mboweni is likely to "stamp authority" in the February budget, but it won't be the case for the mini budget.
RMB Head of Research Nema Ramkhelawan-Bhana echoed similar views in a market update issued earlier this week.
"We believe that it (Mboweni's appointment) will have no bearing on the Medium-Term Budget Policy Statement.
"While Nene played a crucial role in negotiating the funding of the stimulus package from within the confines of the current fiscal framework, he would have had little to do with the formulation of the actual document, which should be near completion," said Ramkhelawan-Bhana.
Tax rate amendments 'unlikely'
Tertius Troost, tax manager at Mazars, explained that it was unlikely that amendments to tax rates would be introduced in the mini budget.
The finance minister will be able to confirm if SARS has been on track in terms of collecting the R1.345trn targeted revenue. However, the recessionary environment will impact revenue collections, as this target was set assuming economic growth of 1.5%.
The South African Reserve Bank, the World Bank and International Monetary Fund have all revised down growth rates for the year.
National head of tax Mike Teuchert said that revenue collections depended heavily on the economy. "If the economy trudges well, we will be in a position where we can reach targets," he said.
If the growth rate declines it will have a direct impact on revenue collections. Businesses won't be doing great, which means employees might not be given increases; and, worse yet, there could be job shedding, he explained. Consumers, who will have less income, will also put VAT collections under pressure, he warned.
"The minister will tell us if we will reach our target or if we have to revise it," said Teuchert.
Chief economist of Old Mutual Investment Group Johann Els told Fin24 by phone on Thursday afternoon that the mini budget is a chance for the minister to give an update on the progress made since the February budget. Els said there would be an indication of how government plans to reprioritise spend to loosen the R50bn required for President Cyril Ramaphosa's economic stimulus package.
Mboweni will only make "significant changes" at next year's National budget announcement, but he is likely to stick to the path of fiscal consolidation, Els emphasised.
Els said that Mboweni's appointment is "very good", because he has an understanding of monetary policy, given that he was the former Reserve Bank Governor. Current Reserve Bank Governor Lesetja Kganyago was formerly the deputy director general of Treasury. The pair will make a great team as they have expertise and understanding in both fiscal and monetary policy, he said.
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