Finance Minister, Tito Mboweni, is expected to present a budget with growth-enhancing reforms when he delivers his budget speech next week. This happens against a backdrop of a weak growth and growing expenditure demands, as well as struggling State-Owned Companies (SOEs).
Revenue is expected to be hurt by a weak economy, a narrow tax base and further demand for bailouts at some state owned companies.
Economic growth is expected to be revised downwards to about 1% to 1 and 1,5% from around 1.7%.
The risk is posed by a breakdown in energy supply at Eskom. Also negative is the the power utility’s huge debt and how government plans to rescue the cash-strapped parastatal with an already strained fiscus.
The Finance Minister is expected to share details on how Eskom will be unbundled, but most economists believe the current negative conditions in the economy will lead to South Africa being downgraded by rating agencies.
Credit ratings agencies are also watching South Africa.
Personal and Company income tax as well as the Value Added Tax (VAT) are expected to remain unchanged. It is expected adjustments to tax thresholds will, however, not fully compensate for inflation.
There is hope that government will be able to reduce the budget deficit to below 4% through an efficient revenue collection and eliminating fruitless government spending.
