Markets worried ahead of Manuel's speech

Trevor Manuel will deliver his 12th budget speech tomorrow

Financial markets were cautious today ahead of Trevor Manuel's 12th budget speech. The address before Parliament, comes at a time when the world's biggest economy, America, is going into recession. Locally, growth targets are being downgraded, inflation is escalating and power outages have crippled business.

The Congress of South African trade unions (Cosatu) and its allies in the People's Budget Campaign, acknowledge that their demands will be overtaken by Eskom's urgent needs this year. But they are calling for more attention to be paid to renewable energies.

Last year Manuel put R8.5 billion in tax payers’ pockets. Economists doubt he will be that generous this year, but companies could be more lucky.

"Given all the pressures that companies have had over the last couple of months especially slowing consumer spending that's impacting on company growth, the electricity shortages that we have seen have had a huge impact on company bottom lines and business confidence so I think it will be positive if company taxes could be reduced," says Johan Els, a senior economist at Old Mutual.

Spending on welfare and social services, especially education and health, is expected to increase significantly this year. That's despite government expecting to collect fewer taxes due to slowing growth.

Experts say this will be one of Manuel's most difficult budgets. Apart from having to respond to the energy crisis and a slowing economy, he will also have to strike a fine balance between the needs of the poor and those of big business.