Finance Minister Malusi Gigaba Paints A Bleak Picture
Deloitte Medium-Term Budget Policy Statement (MTBPS) Commentary 2017 by Nazrien Kader
All eyes were firmly fixed on Honourable Finance Minister Malusi Gigaba as he delivered his first Medium-Term Budget Policy Statement (MTBPS) yesterday, giving, as he put it, “an honest view” of the economic challenges facing South Africa.
Minister Gigaba confirmed the tight spot the country now finds itself in, with revenue shortfall reaching R50 billion, GDP growth forecasts slashed to 0.7% for 2017, and government debt to reach 60% of GDP by 2020.
As a result, there are few options open to National Treasury. Debt repayment costs are already the largest single line item on the budget, at 15%. Government’s response is to pare down the contingency reserve over the medium-term expenditure framework and maintain the expenditure ceiling. Further measures to cut into the deficit will be announced in the February 2018 Budget. “Confidence-boosting measures” and reforms would kickstart economic growth, he promised.
State-owned enterprises are developing a poor reputation and are a major fiscal risk to the country, due to government guarantees of their debt, Minister Gigaba acknowledged. A new board will be appointed at Eskom by the end of November, with a commitment to rein in irregular expenditure, while a strategic equity partner will be brought into the SAA fold.
Despite widespread speculation, the speech did not mention South Africa’s proposed large-scale nuclear build, except to say that it would be implemented with consideration to the economic climate and electricity demand. Nor did it give any further details regarding the National Health Insurance scheme – a flagship project for the health ministry.
However, government will continue to protect spending on core social programmes that benefit poor South Africans, the minister promised. “We must get out of our own way and forge a working coalition for inclusive growth and economic transformation. Restoring confidence is the cheapest form of stimulus we can inject,” he said.