JOHANNESBURG - Economists have warned that South Africa’s muted growth and pace of implementing reforms could throw the economy into a tailspin if Finance Minister Tito Mboweni’s Budget speech tomorrow fails to inspire ratings agencies.
Investec economist Lara Hodes yesterday said that Investec was anticipating a widening of the fiscal deficit, underpinned by weaker economic growth than previously projected.
Hodes said they anticipated the consolidated Budget deficit to be slightly higher than forecast in the medium-term Budget policy statement at 6.1 percent of gross domestic product (GDP) in 2019/20.
“The tightening of fiscal levers is key to rebuilding confidence and avoiding further credit rating downgrades,” Hodes said.
Mboweni’s task to reduce the country’s debt burden and defend the last investment grade credit rating is not going to be easy.
The GDP for 2020 is now anticipated to be less than 0.5 percent year-on-year.
The national debt exceeds R3 trillion and it is expected to rise to R4.5trln the next three years.
In October 2019 Mboweni announced a revenue shortfall of
R50 billion.
Slowing growth in the compensation bill and additional revenue measures, basically reducing the public wage bill, would also be needed, he said.
Mboweni needs about R150bn of additional fiscal consolidation measures over the next three year.
Bonang Mohale, former chief executive of Business Leadership South Africa, yesterday said that Mboweni could consider implementing zero fiscal drag relief, taxing illicit tobacco, auctioning the 5G spectrum and disposing of the 40 percent Telkom stake as some of the “low hanging fruit”.
“The disposal of non-core assets is imperative, which might free up about R7bn. Because the government does not have the money, options for private sector participation (PPP) is our only salvation in this current crisis,” Mohale said.