Finance Minister Nhlanhla Nene faces a baptism of fire next week. The minister will table his maiden budget speech as some of the country’s state-owned enterprises can hardly keep their heads above water.
Managements from the South African Airways, Post Office and Eskom will be hoping that the minister announce measures to gives their institutions new leases of life to deal.
There are high expectations as Nene prepares to deliver the first budget speech of President Jacob Zuma’s second administration.
And South Africa continued to perform below its potential, business and consumers have been the hardest hit. Now everyone is hoping that this week’s budget speech will announce new measures to ease their current economic challenges.
Pan African Investment’s economist, Iraj Abedian says: “It is going to be a tough one, the minister is facing difficult position where growth fell below one-and half, meaning government revenue has plummeted.”
On the other hand government also needs to apply caution in its endeavours to collect the required amount of revenue. The state is desperate to raise revenue to meet its growing list of social grant recipients. More than sixteen million South Africans are on grants and the list is expanding almost daily. Tax revenue is expected to exceed one-trillion rand next year.
Abedian adds that, “Having introduced policies to raise child support grant from 12 to 18 years, those are politically popular decisions but they have implications on government liability towards welfare.”
The biggest challenge facing Nene is to provide for essential costs that are not covered in the budget. Sky-high public sector wage demands, the cost of corruption and finding more money to fund struggling state-owned companies. Some experts say the fiscus cannot afford to bail out public enterprises.
Investment Solutions economist Chris Hart adds, “ We are turning energy into a competitive disadvantage. We need to look at factors that driving up energy cost we need to consider partial privatisation of Eskom.”
The National Treasury has already committed to an expenditure ceiling. This means that no new money will be added outside what’s already proposed.
Earlier this year former Finance Minister Pravin Gordhan said the proposal in the February budget speech were binding to the new administration.
Business is calling on government to prioritise carefully the government institutions requesting financial support and guarantees from the fiscus.
The Budget faces pressures from the various programmes government has to put in place, the public sector wage bill and the rising social security demands amongst others.
Economists expect the budget deficit to grow as a result.
– By Tshepo Mongoai
