The Budget Dialogue

● The Sunday Times, in partnership with RMB and Mkokeli Advisory, hosted a dialogue on the budget tabled by Finance Minister Enoch Godongwana. In the discussion, moderated by business news anchor Nastassia Arendse, Godongwana and experts were quizzed on their views on the fiscal picture and the economy broadly. RMB’s chief economist Isaah Mhlanga and Deloitte Africa’s MD for tax Itireleng Kubeka joined the minister on stage, while National Treasury Director-General Duncan Pieterse contributed from the floor.

How did they score the budget?

Enoch Godongwana 8/10 Isaah Mhlanga 7/10 Itireleng Kubeka 6.5/10

QUOTES: Godongwana:

● This is not an election budget, don’t bother asking about it. An election budget should have been last year, this budget can’t influence electoral outcome. I have been told by colleagues that the Treasury and I are trying to undermine the ANC’s electoral outcomes. I have spent my whole adult life in the ANC for me to be told I’m undermining its electoral outcomes.

● I was talking to Former Finance Minister Trevor Manuel, he says for a Minister of Finance, there is something called ‘luck’. He had luck. Eskom was working and Transnet was working. There was no state capture, so he had sheer luck. When he left debt to GDP was 24% (now approaching 75.3%), he was lucky.

● With regard to [gold & foreign exchange contingency reserve account]; Director-General Duncan Pieterse in September ... had no clue about it, now he is the best expert. He’s been working with the best experts globally to ... figure out how this thing works, how to mitigate risk …

● The battle was about spending (forex and gold reserves). The politicians, including me, were on the side of spending. We are going into an election and politicians were saying we could put into spending priorities, Duncan and the team drew a line and they defeated us. They make the decisions and I become the spokesman.”

● My little reading of the literature on fiscal consolidation suggests it should be done as far away from the elections as possible. When we come back (after the elections), that's the time to do it, do it faster and by 2026/27, we are closing it (the consolidation).

Mhlanga

The surprise was GFECRA … it is quite clear what the Treasury is trying to do. It is trying to reduce debt service costs, which is the right thing to do. The other thing to do would have been to solve the problem of infrastructure but that can’t give immediate results because it takes time, so it’s a sensible thing.

Kubeka:

This is one of the most difficult budgets, this is also an election year but I think GFECRA was definitely the surprise. (On the introduction of a 15% minimum corporate tax for multinational companies).

This came from the OECD in trying to help prevent tax base erosion, especially in the lower-income tax jurisdictions where multinationals are transporting their funds into that space.