South Africa’s annual Budget, to be presented on Wednesday, comes at a crucial time in the electoral cycle for the ruling ANC. A watershed National election is pencilled in for May 2024, at which the ANC looks sure to lose its control of Parliament. Adding to the pressure to dispense vote-catching gifts by an embattled political party is an unexpected income overrun between R80bn and R90bn in mining sector taxes via a commodities price boom. Stanlib chief economist Kevin Lings outlines the significant issues facing SA finance minister Enoch Godongwana, warning that investment markets will punish any short-term profligacy, especially given the fragile nature of the income windfalls. He spoke to Alec Hogg of BizNews.
See timestamped topics below:
00:00 Introduction: Budget backdrop
00:53 Enoch Godongwana’s challenging position
01:30 Likelihood of politicking
02:02 Social payments
02:24 Government salaries
03:26 Basic income grant
04:50 Windfall from commodity price boom and allocation risks
10:38 Expectations and hopes of investment markets
14:23 Influence of the electoral process
14:53 Required reforms not coming through
18:17 Whether Godongwana might bring hope from left field
21:01 South Africa’s chance of being grey-listed
Extracts from the interview below:
Kevin Lings on Enoch Godongwana’s terrible position presenting Budget 2023
It’s a terrible job because you’ve got so many challenges you’re trying to deal with in terms of economic constraints. And then, at the same time, you’ve got a difficult political backdrop where you’re going into a national election. And the party, the ANC, is under pressure. So there would be extra pressure on the Minister of Finance to try and alleviate all of these constraints, and he simply can’t do it. So it’s a balance in terms of where he can focus his attention. But ultimately, he’s going to reflect on the fact that the fiscal position remains problematic.
Whether the basic income grant is likely to become a permanent feature
I think that’s where it’s going. The minister did say to his credit in last year’s Budget that he doesn’t want to initiate a permanent increase in expenditure if a permanent increase in revenue does not accompany it. And that’s a 100% fair policy approach. And he’s referring there to the mining tax revenue, which has been extremely buoyant. Still, you don’t want to initiate additional social payments using that revenue as the source because, obviously, that revenue may dissipate. But I think the reality is that we’ve now extended this for the second time. It’s likely that the R350 will morph into some sort of income grant. I don’t think it will be at the level that’s been requested. We just simply can’t afford that. But I do expect that it’s going to become a permanent feature in time and then get a name change and may be merged with other social payments. And clearly, that is being looked at.
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