Minister of Finance Enoch Godongwana will be tabling South Africa’s Medium Term Budget Policy Statement (MTBPS) on Wednesday.
But why is the MTBPS so important and why should ordinary South Africans care.
Why is the MTBPS important?
According to the National Treasury, the MTBPS establishes the fiscal framework for the upcoming budget and updates Parliament as well as the public on the Treasury’s economic assessment.
In his address, the Minister will present SA’s economic outlook including forecasts for inflation, productivity, unemployment and trade balance.
What should South Africa’s expect?
According to Andre Cilliers, Currency Strategist, TreasuryONE, the MTBPS is SA’s second most important fiscal update.
“The MTBPS will serve as a platform for the GNU to demonstrate its commitment to economic stability and fiscal discipline,” Cilliers said.
Everest Wealth chief executive officer, Thys van Zyl said that this is the first MTBPS after the formation of the GNU and Godongwana is likely to announce good news in the form of an improved economic outlook for South Africa.
According to van Zyl, this can be attributed to amongst other things:
– load shedding which has not been issue in the country for the past seven months
– the GNU which has led to improved market sentiment and optimism about greater political stability
– a windfall for the fiscus due to taxes on the withdrawals from the new two-pot retirement system which apparently is already more than the initial estimate of R5 billion.
However, according to Cilliers, the boost in growth that is expected from the end of load shedding and improved infrastructure, are unlikely to afford any major spending leeway.
"It is expected that Godongwana will announce how the government will further accelerate reforms in order to stimulate economic growth and at the same time also how the state will further tighten its belt,“ Godongwana said.
“The focus will therefore fall particularly on the public sector wage bill, the management of the state's debt burden and whether anything will be said about whether the Social Relief of Distress (SRD) grant will be extended or if a permanent basic income grant will be introduced."
The ability of government to secure long-term investments for issues like the logistical constraints, the power crisis and water and infrastructure problems is important for sustainable economic growth.
"We hope the minister will put a tighter focus on public-private partnerships by announcing specific initiatives to make this possible.
“Measures must also be announced to make it easier to do business in South Africa."
In terms of state-owned enterprises no major announcements are expected however there is the possibility that the Finance Minister will make provisions for the National Health Insurance (NHI) over the medium term.
"It would be good if Godongwana could give an update on what has already been done and where the process is to get South Africa removed from the international grey list,“ van Zyl said.
The successful implementation of structural reforms will stimulate economic growth in SA.
Van Zyl said: "However, the big question is whether the RNE can maintain political stability in the midst of visible ideological, political and policy differences. The RNE is still given the benefit of the doubt, but any possible instability could undo the successes so far."
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