Gigaba faces tough budget speech

ALL EYES will be on Finance Minister Malusi Gigaba as he delivers his maiden mediumterm budget policy (MTBP) statement in less than a week amid allegations of state capture and corruption in South Africa, according to Nazrien Kader, the managing partner of Deloitte Africa Tax & Legal Services.

This as rating agents have the country on watch. He said while the government remains pre-occupied with bailouts for state-owned entities, economists estimate that revenue collections will fall short of budgets, continuing the steady downward trajectory, from an estimated shortfall of R30 billion earlier in the fiscal year to between R50bn to R65bn more recently.

South Africa’s revenue shortfall was likely to be the focus of Gigaba’s statement, according to NKC African Economics economist Elize Kruger.

The statement sets out the government’s three-year fiscal plans. In addition to the revenue shortfall, Gigaba will deliver the speech amid slow economic growth, allegations of failing governance and rampant corruption at key state-owned companies and political noise that is reaching deafening levels ahead of the ANC’s elective conference in December.

Since being appointed finance minister in March, Gigaba has used his interactions with local and international investors to reaffirm South Africa’s commitment not to stray from the fiscal consolidation path.

Kruger said, given its impact on the fiscal balance to GDP ratio, the revenue shortfall, would feature strongly in Gigaba’s speech.

She also joined the chorus of economists who expect Gigaba to tweak the GDP growth forecast for the 2018 financial year. She said Gigaba was likely to lower the forecast from the current 1.3% to 1.1%. Most analysts expect Gigaba to lower the forecast to less than 1%.

Economist Mike Schussler said the most import issue for the minister to deal with on Wednesday was the budget shortfall. He estimated it to be about R40bn.

“The minister finds himself in a difficult place, and his collection agency is starting to shake the tax tree very hard.

“There is not a lot more to shake out of that tree,” said Schussler.