Mboweni’s budget balancing act

South Africa’s new finance minister will target spending on agriculture, infrastructure and job creation projects in his inaugural budget speech tomorrow in a bid to haul the economy out of a recession.

With the government facing ballooning debt, stubbornly high unemployment, struggling state companies and dwindling coffers, Tito Mboweni, a former central banker only two weeks in the top finance job, will have to walk a tightrope to breath new life into the economy.

Mboweni’s budget speech comes as President Cyril Ramaphosa tries to woo investors after years of weak economic growth and analysts are also watching to see if the budget will include concessions to attract investors.

Agriculture will be a key focus for the government, BNP Paribas senior economist Jeff Schultz said.

“Agriculture economy in South Africa has shrunk quite significantly over the last decade or so and there is a big push to try and improve that side of the economy because it is employment enhancing,” Schultz said.

Appointed on October 9 as the fourth finance minister in the last two years, Mboweni is seen as providing stability in an office that has seen a high turnover of ministers, causing upheavals in the rand and bond markets.

Mboweni’s Medium Term Budget Policy Statement is expected to mirror previous budget balance forecasts for the coming two fiscal years, a Reuters poll showed.

Ramaphosa last month announced a stimulus plan that included R50 billion of expenditure, a portion of which would be funds shifted from low performance departments, and new funding.

The president also flagged a R400 billion infrastructure fund to be launched soon.

Analysts and rating agencies are keen to see where Mboweni will find the stimulus money from the R1.67 trillion allocated in the 2018 budget.

He is also expected to provide revised fiscal deficits and growth forecasts.

“The expenditure ceiling will survive while there will be virtually no room to credibly pencil in any additional taxes,” Peter Attard Montalto, head of capital markets research at Intellidex, said in a note.

He said that contingency reserves and unspent allocations, such as some provisions for drought, would make up the stimulus cash. – Reuters