THE FIX WILL BE LONG, AND SLOW
It is a measure of how far SA has come, as it tries to get back on its feet, that it was finance minister Tito Mboweni who stood up in parliament this week to brief president Cyril Ramaphosa on the country’s finances — rather than the cartoon villains of previous years, like Malusi Gigaba or Jacob Zuma.
At the same time, it’s a measure of just how hard that journey is that the best Mboweni had to offer SA during his maiden budget speech was some cosmetic signals, rather than any booming plan to miraculously produce 3% growth.
Those tweaks — like a freeze on MPS’ salaries and plans to offer early retirement to 30,000 civil servants, as well as some stern words for Eskom in exchange for a R69bn bailout — seemed admirable enough, if short of what some hoped.
It lays bare the essential fact that Mboweni was in a corner, in a way that no other finance minister has been since democracy. It meant that Mboweni, a flashy guy known for his penchant for cigars, fine wine and fly-fishing, didn’t have any leeway for any firework surprises.
So, there were no merciful tax cuts, but nor were there any tax hikes; there was a lifeline for Eskom, but just enough to keep it solvent; and there was a tentative plan to sell a stake in one of Eskom’s three units.
Nedbank CEO Mike Brown is right in saying this budget was “always going to be a difficult set of compromises”. But Brown, the longest-serving bank CEO in the country, puts his finger on its central weakness: “What was lacking was specific detail of growth-enhancing reforms … the fiscal deficit is getting very, very close to where Moody’s will become uncomfortable.”
The cold numbers are, at best, uninspiring. At worst, it won’t be enough to stop Moody’s from joining the other two ratings agencies, Fitch and S&P, in dropping SA’S sovereign rating below investment grade to junk on March 29.
So, the National Treasury cut the government’s expectations of GDP growth from 1.7% to 1.5% for this year, it barely contained the debt-to-gdp ratio at 60%, and it said tax revenue would be R15.4bn lower than what Mboweni expected in October.
Perhaps more acutely, the budget deficit — the gap between the government’s spending and what it collects — is expected to hit 4.5% this year. True, it’s less than the 6.3% deficit of 2010, but at least then there were other levers to pull. Now, Mboweni is out of options.
Still, if the market reaction is anything to go by, Moody’s may stay the execution a bit
Subeditors: Dave Landau (Chief), Magdel du Preez (Deputy),
Dynette du Preez.
Proofreader: Norman Baines.
Art director: Debbie van Heerden. Contracted artists: Colleen Wilson, Vuyo Singiswa, Sylvia Mckeown. Graphics & statistics: Shaun Uthum. Photographer: Freddy Mavunda. Editorial assistant: Onica Buthelezi. Office assistant: Nelson Dhlamini. longer. The rand inched just 0.2% lower against the dollar after the speech, while the JSE’S all share index dipped marginally from its earlier thumping highs, but still ended the day 0.9% higher.
Predictably, opposition parties didn’t like the budget— as you’d expect in an election year.
DA leader Mmusi Maimane called it a “lipstick budget”, which “made it look pretty on the outside, but frankly it did nothing”.
EFF leader Julius Malema said it was clear Mboweni had nothing to offer.
“He just repeated exactly what he said in the past — there were no clear plans on job creation, no clear plans on land expropriation,” he said.
Malema was also not enthusiastic about Mboweni’s most provocative statement: “Isn’t it about time the country asks the question: do we still need these stateowned enterprises? If we do, can we manage them better? If we don’t need them, Editorial tel: Johannesburg (011) 280-5808/3000.
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