Wednesday’s Medium-Term Budget Policy Statement is expected to lay bare the country’s economic woes.
In his speech, Finance Minister Tito Mboweni will highlight several areas in the economy that have deteriorated.
At the centre of the country’s economic trouble is falling revenue to meet growing spending.
Since 2009, government has been borrowing to meet its budget shortfall. It is no longer sustainable for the country to continue borrowing.
The cost of servicing government debt is expected to reach R4.9 billion in 2019/20 and R7.9 billion 2020/21.
Executive Director of Centre for Development and Enterprise Ann Bernstein says: “South Africa’s fiscal crisis is very serious. The weight of our debt is holding back growth. We need to adopt reforms that will send strong signals about a new ear that will impress investors.”
Meanwhile, Economist Lumkile Mondi says the mid-term budget policy statement could include unpopular decisions for some members of the tripartite alliance.
Mondi says in the light of the country’s battling economy, Mboweni has limited options that he could pursue without upsetting some of the comrades in the African National Congress.
Mondi expects the mid-term budget to focus on a slew of economic reforms.
Taxes
Tax experts say Minister Mboweni is unlikely to make announcements on new taxes. Brian Dennehy, a tax expert with Webber Wentzel says implementing a new tax will be difficult as it will not make a significant difference in terms of revenue. He predicts a revenue shortfall as SARS struggles to achieve its tax collection targets.
“If you look at what is the breakdown of our tax pipe currently, personal income tax is 38% in collections, company income tax 20% and value added tax 24% and really the other bits and pieces that account for the rest. It’s difficult to see how, given the very, very slow economic conditions, how we are going to increase anyone of those three pillars.”
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