Newly appointed Finance Minister Tito Mboweni will on Wednesday announce government’s priorities and budget adjustments in his medium-term budget policy statement.
The focus is expected to be on how government will balance increasing spending pressure against low revenue in a weak economic growth environment.
Government will have to put emphasis on continued fiscal consolidation while reprioritising funds to help kick start the economy.
Political parties expectations
Opposition political parties in Parliament say they expect Finance Minister Tito Mboweni to present a Medium Term Budget Policy Statement that will stimulate the economy, create jobs and cut any and all unnecessary frills.
The Democratic Alliance (DA) says it expects Minister Mboweni to maintain fiscal discipline, in the Medium Term Budget Policy Statement.
The party says with rising petrol costs, the high unemployment rate and a one percent VAT increase this year, Mboweni cannot expect South Africans to continue paying for wasteful expenditure and bail outs for ailing State Owned Enterprises.
“We believe that the minister must announce a comprehensive spending review aimed at cutting wasteful expenditure in South Africa,” says party’s spokesperson on Finance, David Maynier.
The Inkatha Freedom Party (IFP) says the budget must be aimed at boosting small business development, infrastructure investment and education. IFP MP, Mkhuleko Hlengwa, says small businesses are the backbone of the economy.
“The minister must present a strong recovery package to take the economy out of this quagmire and to ensure that he is able to stimulate growth to create jobs.”
The National Freedom Party wants emphasis on funding for higher education. The party’s Chief Whip Nhlanhlakayise Khubisa also says the Minister must ensure policy certainty so as to attract more investment. “What is done to deal with the debt and also fiscal discipline to ensure policy certainty for investors to come to the country?”
Both the Freedom Front Plus and African Christian Democratic Party (ACDP) say the budget must address the increasing government debt.
“He must tell us what he is going to do as far as the salaries of civil servants are concerned because that is also a huge part of the budget and also make announcements acceptable by the rating agencies, “ says FF Plus leader, Pieter Groenewald .
ACDP MP, Steve Swart;” The minister must stick to the strict fiscal consolidation path. This will satisfy foreign investors and credit agencies, stick to the expenditure ceiling, reduce government expenditure and consolidation.”
Treasury is expected shed more light on the stimulus package announced by President Cyril Ramaphosa.
Growth has disappointed this year, shattering hopes of impressive revenue collection. This is on the back of continued expenditure pressures.
All these factors are likely to make the job of the new Finance Minister difficult.
Economists say Treasury will likely revise growth estimates downwards to about 0.5% for this year. Rating agencies will be watching for signs of fiscal slippage should the minister announce higher public sector debt.
Expenditure vs tax increases
Economists expect Finance minister to make some announcements on expenditure rather than tax increases in the mid-term budget.
Economists say there is no more room for VAT increases and that revenue collection needs to be more efficient. This could be achieved by increasing tax compliance measures and fixing tax administration and governance challenges at SARS.
Analysts say Revenue collection will be better if SARS can be fixed. -Additional reporting by Amina Accram