This graph from Stanlib economist Kevin Lings encapsulates yesterday’s Mini-Budget horror show: the gap between spending and income has been widening for a decade – lockdown simply accelerated the tragedy. Private citizens who consistently spend more than they earn get sequestrated. Companies applying similar idiocy go out of business. Governments get voted out of office. Eventually.
Also read: Alec Hogg: For answer to what Ramaphosa’s ‘long game’ means, ask Rassie
With R300bn less in tax revenues and State spending rocketing, this year the SA State python-mouth has blown past maximum elasticity. True, SA is not the only country in this pandemic-created boat. But few others suffer quite so restrictive a yoke of economic inflexibility. Tito remains hopeful SA will transform its way from penury. It’s his last card.
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Also read: Tito Mboweni refills cookie jars raided by Zuma family, friends
Much as we’d want Tito Mboweni to be heard internally, of late the ANC has a track record of spiking the guns. Every year Treasury compiles Budgets relying on innovations that make the numbers reasonable. These rarely fly. Consider the Gordhan era’s promised 5% cut via centralised procurement. Or Tito’s punt last year on cutting the wage bill through early retirements (the take-up was pitiful).
This means despite Treasury’s best efforts, SA’s National Budget has become nothing more than an optimistic guess. For the rational mind, the way to play this is by focusing on things you can control by digging deeper within your own circle of competence. SA remains a land of massive opportunity. But just like in many emerging nations, those who succeed do so despite the politicians – not because of them.
For your attention today…
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* The latest episode of my weekly Inside Investing podcast is ready for you. It features Piet Viljoen grilling Sasol’s new CEO Fleetwoood Grobler and some excellent news from Mark Barnes on the Kisby SME Fund is preparing to grant its first loans. Here’s the link: https://www.biznews.com/entrepreneur/2020/10/28/sasol-5
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