SA looks past budget in $100bn drive

SA is hoping investors will look past Finance Minister Tito Mboweni’s bleak mid-term budget as SA seeks to woo R1.4 trillion into its economy.

SA’s first investment summit kicked off yesterday after Mboweni’s plans showed government debt peaking later and at higher levels, the fiscal shortfall widening and state revenue continuing to undershoot.

The event in Johannesburg is part of President Cyril Ramaphosa’s drive to restore confidence and boost an economy that hasn’t expanded at more than 2% annually since 2013. Although the rand and bonds plunged on the budget news, issues such as land reform and ongoing inquiries into alleged graft under former president Jacob Zuma are more important to long-term investors than the numbers, according to George Herman at Citadel Investment Services.

The deterioration in the numbers is “marginal and should not deter any of those investors” who attend the summit, Herman said. “The presentation shows that the Treasury wants the country to stick to the expenditure ceiling. Mboweni carries that respect. I don’t think this detracts from investors for long-term investment.”

Treasury more than halved its economic growth forecast for 2018 to 0.7% after the economy plunged into a recession.

Still, “it will be disappointing for Ramaphosa to go into this summit after this budget,” said Halen Bothma at ETM Analytics.

Mboweni wasn’t overly concerned by the sharp market response.

“Once markets look overall at what is contained in the statement, they’ll get a sense of balance,” he told reporters.

“I suspect they will calm down a bit …”

Paul Mashatile, ANC treasurer-general, attributed the deterioration in SA’s finances to the poor decisions taken during Zuma’s tenure.

“I think we are paying for the terrible years, and the minister is very clear we shouldn’t go the other way … Let’s rebuild,” he said. “We think we are on the right course now.”

The budget shows that government will rejig expenditure to direct more money to areas that may create jobs.

“Even in the worst of times, South Africa has successfully and consistently adhered to its expenditure ceiling,” Razia Khan at Standard Chartered said.

“While the headline of Mboweni’s mid-term budget may have disappointed, the underlying story should not be overlooked.”

The summit is expected to attract about 1 000 delegates, with the main sessions on opportunities in specific industries taking place today. – Bloomberg