Anchor’s wish list for the November 2021 MTBPS

22 October 2021


by Casey Delport, Investment Analyst

On 11 November, South Africa’s (SA’s) Minister of Finance Enoch Godongwana will table his maiden Medium Term Budget Policy Statement (MTBPS) amid the country’s increasingly complex fiscal environment. The MTBPS serves several important roles including setting out National Treasury’s (NT’s) policy framework for the February 2022 Budget, updating NT’s economic forecasts for SA, and adjusting the budgets of government departments. This year’s MTBPS will centre around stabilising the local economy, given the continued negative impact of the COVID-19 pandemic and the July social unrest, in an attempt to bring SA’s debt down to sustainable levels. Thus, the finance minister will have to carefully navigate mounting pressure to raise spending on items such as social grants and salaries in the face of a temporary revenue boom that has, in the short-term at least, helped allay government’s fiscal woes.

Government revenues are forecast to outperform the February Budget’s targets by c. R169bn this year, driven by the combination of a better-than-expected recovery in economic activity and a commodity price boom which, in turn, has boosted corporate income tax payments and mining royalties. However, expenditures are also likely to overshoot their original February Budget targets this year. The economic support package announced by President Cyril Ramaphosa in the wake of July’s social unrest has amounted to R34bn of additional expenditure, including the reintroduction of the Social Relief of Distress (SRD) grant. In addition, the latest public sector wage deal will cost the state an extra R20bn that was not budgeted for although government has said that this will be funded by a reprioritisation of existing funds. Consequently, the budget deficit for this year is now forecast at c. R350bn vs the R483bn target in the February 2021 Budget. Furthermore, given the recent restatement of the national accounts, which lifted the estimated size of nominal GDP by 11%, this translates into a deficit of 5.6% of GDP vs the 9.0% target that NT published in February.

Unfortunately, lately, government appears to be acceding to spending commitments that risk becoming permanent, even as commodity prices have softened. Looking ahead, uncertainty about the government’s stance on public sector pay remains, as well as how it will fund the extension of the public employment programme, and whether government will extend the SRD grant or even possibly expand it into a full basic income grant. The MTBPS will likely allude to these issues even if it may not fully answer them. Nonetheless, amidst all these factors, and in anticipation of the upcoming tabling of the MTBPS, the points highlighted below form part of our wish list, or set of ideals, for this year’s MTBPS:

  1. Taking action against those implicated in wrongdoing at the Zondo Commission.
  2. No budget reduction for the National Prosecuting Authority (NPA) or, better yet, allocating more money to the NPA, and the Special Investigating Unit (SIU) to fight rampant corruption.
  3. A demonstration of government’s intention to follow a path of fiscal consolidation with difficult actions rather than simply words.
  4. A credible plan that brings debt accumulation under control and where debt levels begin to come down rather than escalating at a slower pace.
  5. A demonstration of additional measures to improve the ease of doing business in SA.
  6. Further details surrounding potential liabilities of the Road Accident Fund (RAF), as well as other smaller state-owned enterprises (SOEs), which are currently in distress, including Denel, the Land and Agricultural Development Bank of SA (Land Bank), the SA National Roads Agency (SANRAL), etc.
  7. Detailed plans to address the financial distress of municipalities around the country.
  8. The presentation of feasible growth targets that reflect the current economic reality of the country.
  9. More details surrounding the previously announced reprioritisation within the existing expenditure envelope to fund new spending commitments
  10. Clarity surrounding the future of the SRD grant i.e., will it be expanded into a formal basic income grant?

Whether any of the abovementioned wish list items will indeed come to fruition remains to be seen. There are also plenty of other fiscal-related issues that need to be addressed and this list is by no means exhaustive. Interestingly, some of the abovementioned points are unchanged from the wish list we released prior to the February Budget (see our report entitled Anchor’s 2021 Budget wish list, dated 2 February 2021), indicative of the many uncertainties and unanswered questions still present in the SA fiscal space. The extent to which new spending absorbs any fiscal windfall is crucial in our view as it would reflect the true commitment of government to fiscal consolidation. Overall, SA’s fiscal situation remains precarious, and the debt service burden is unsustainable, so striking the right balance between providing relief and improving the fiscal prognosis of the country continues to be imperative.



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