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'MTBPS should provide hints on social grant plans, public sector wages'

10 November 2021 9:01 PM
Tags:
SA Economy
The Money Show
Budget
Bruce Whitfield
Enoch Godongwana
Medium term budget policy statement
MTBPS
economic recovery
Finance Minister Enoch Godongwana
2021 MTBPS

Peter Worthington (Absa) discusses to what extent the Finance Minister can address SA's challenges in his 'mini budget'.
New Finance Minister Enoch Godongwana at the swearing in ceremony at the Union Buildings in Pretoria on 6 August 2021. Picture: GCIS.

Enoch Godongwana is set to deliver his first Medium Term Budget Policy Statement (MTBPS) as Finance Minister on Thursday.

What can South Africa expect the Minister to come up with amid record unemployment and the latest round of unrelenting load shedding?

The country's finances are pretty awful - we've got too much debt, we spend too much, we've some unsustainable state-owned enterprises... but it's not as bad as it could have been. Certainly, we've had a commodity price boom which has helped pay corporate income taxes, mining royalties have been better than expected

Bruce Whitfield, The Money Show host

So is it all doom and gloom for Godongwana's first MTBPS?

Whitfield puts the question to Peter Worthington, Senior Economist at Absa.

Worthington agrees that the commodity price boom is something to be grateful for.

The fact that we have had a bit of a commodity price boom is certainly supporting our fiscal revenues... The mining sector boom has supported our tax revenues... also mineral royalties...

Peter Worthington, Senior Economist - Absa

We actually think that our total revenues are going to be R169 billion more than was forecast in February, when the Budget was passed.

Peter Worthington, Senior Economist - Absa

Although revenues will be better than anticipated this does not solve South Africa's problems he notes.

That is very welcome news, but unfortunately we have a number of pressures on the spending front as well, and we didn't start off in a good position on the fiscus either. Back in February we were expecting a deficit of about 9% of GDP...

Peter Worthington, Senior Economist - Absa

We have this situation in South Africa where the real interest rate on government borrowings is in excess of the real GDP growth rate... We need to be running a primary budget surplus to stabilise GDP... Even with a deficit below 6% - and we're forecasting 5.6% - we're still running a primary budget deficit.

Peter Worthington, Senior Economist - Absa

That means that the debt burden is going to continue to rise.

Peter Worthington, Senior Economist - Absa

Worthington says the MTBPS is essentially about setting expenditure priorities over the three-year medium-term expenditure framework.

One of the critical issues he cites is what government is planning to do about social grants.

RELATED: '10 million people go hungry – the budget must respond!'

We know that there's tremendous pressure within the governing alliance and within South Africa more broadly to introduce a basic income grant. I think that one of the most difficult challenges National Treasury and the Finance Minister will be dealing with is to figure out what level of social grant expenditure the country can afford.

Peter Worthington, Senior Economist - Absa

Worthington says he doesn't expect an answer to this from Godongwana on Thursday, as more study work needs to be done.

There should be some hints in the Finance Minister's MTBPS however, along with more about public sector wages as well, he adds.

Listen to Worthington's analysis and predictions below:


This article first appeared on CapeTalk : 'MTBPS should provide hints on social grant plans, public sector wages'




10 November 2021 9:01 PM
Tags:
SA Economy
The Money Show
Budget
Bruce Whitfield
Enoch Godongwana
Medium term budget policy statement
MTBPS
economic recovery
Finance Minister Enoch Godongwana
2021 MTBPS

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