Finance minister Enoch Godongwana presented his maiden medium-term budget policy statement (MTBPS) to parliament today, and boy! He faced a lot of pressure to fulfill the promises made by his predecessor, amateur chef Tito Mboweni.
Remember, the MTBPS is more about policy and strategy than it is about numbers. It also follows a torrid 12 months of Covid-19, July’s riots and chronic loadshedding. But take heart: the economy rebounded more positively over the past year than expected, a result of the global economy reopening and improved exports from our commodities and agricultural sectors. Things are not looking as bad as we thought they would thanks to that commodities boom we told you about last month.
Here are three big issues from Godongwana’s speech:
- Debt and GDP
Our debt levels are pretty high, but some recent estimates show that the economy could get some reprieve on the back of the commodities boom, plus the fact that a Stats SA review found the 2020 economy was 11% bigger than previously expected. GDP growth will help us narrow the budget deficit, so Godongwana’s announcement that GDP is expected to grow 5.1% this year, much higher than the February forecast of 3.3%, is encouraging. We’re looking for more growth prospects like these.
- Social grants
The basic income grant (BIG) is a BIG topic. Many households suffered financially due to the pandemic and unrest. Following those July protests Mboweni announced the R350 BIG would be extended to March next year. But the country’s finances are already stretched and economists say a long-term solution is needed to sustain the grant. The minister said plans for the BIG will be outlined in the February budget.
- State of SOEs
Many of our state-owned enterprises are a mess. The priority, though, is (you guessed it) Eskom. 💡 The parastatal is R402bn in debt and others like SAA, Denel and Transnet are also in hot water. Godongwana announced today that National Treasury will try to avoid further bailouts to parastatals and will instead work on restructuring them and even letting go of some.
We’ll be watching these developments.