Preview: Medium Term Budget Policy Statement

2015-10-20
Dr Pieter Mulder

The FF Plus is expecting total frankness tomorrow from the Minister of Finance, Mr. Nhlanhla Nene, about South Africa’s current economic crisis. Any attempts to conceal the current poor economic state with politically correct statements will set off the alarm bells with the international credit rating agencies.

Where the minister had forecast a growth rate of 2% in his February 2015 budget speech, it is now closer to 1,3%. It has far-reaching implications for the predicted income of the state from tax revenues. To balance the books, the minister could raise taxes or restrict state spending further. If he chooses to cover the deficit with further loans, South Africa runs the risk of increasing the country’s debt to 50% of GDP. This is all the international credit rating agencies would need to further downgrade South Africa’s credit rating. These agencies did not hesitate to recently to downgrade Brazil’s credit rating to junk status.

Where business confidence is at its lowest in South Africa, the minister has to announce measures which could assist in restoring confidence. A clear emphasis on infrastructure projects in stead of salary increases in government could assist with this. So too, would a clear moving away from government interference and red tape in the economy.

 

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