Johannesburg- The spotlight will be on new Finance Minister Enoch Godongwana on Thursday when he is expected to table his maiden medium-term budget policy statement (MTBPS).
The MTBPS, often referred to as the “mini-budget”, sets out the policy framework for the main budget (presented in February each year), updates National Treasury’s economic projections, adjusts the budgets of government departments and makes emergency changes to spending.
Godongwana replaced Tito Mboweni as the political head of the National Treasury in August when President Cyril Ramaphosa reshuffled his cabinet.
FNB chief economist Mamello Matikinca-Ngwenya said she did not expect the MTBPS to signal any deviation from the current fiscal consolidation path.
“Instead, the budget could highlight progress on critical policy considerations such as the Public Procurement Bill and implementation of the zero-based budgeting framework,” she said.
FNB also expects the budget to highlight progress on various options that government is considering to address the widening poverty gap, which include:
- The basic income grant (BIG);
- An extension of the R350 social relief of distressed grant; and
- The extension of the presidential employment stimulus and job seekers allowance.
There has been a strong push from ANC allies, SACP and Cosatu for the introduction of BIG. The BIG is a form of social assistance. Unlike other common social grants (disability grant, elderly grant or child grant), this particular grant is intended to provide an income source to people who cannot access employment or make meaningful income.
The BIG’s critics argue SA cannot afford the scheme.
The country’s debt-to-GDP ratio is hovering dangerously close to 100%. Accounting for 3.3% of GDP and 15.4% of total government spending, the cost of South Africa’s social assistance system is relatively high compared to the average of other upper middle-income countries.
Speculation is also rife that Godongwana will propose that the Covid-19 social relief of distress grant be terminated and replaced with a ‘family grant’.
Economists expect that revenue numbers for 2021 are likely to exceed the February Budget numbers by something in the region of R120-billion on the back of a boom in commodity prices, corporate income tax and mining royalties.
Absa has said it expects mining royalties to net the state R29-billion.
“Unfortunately, the government has already begun spending this, which is exactly where the uncertainty lies.
“There are several big-ticket social commitments on the cards and the question is: how permanent will some of this social relief spending become?” asked Citadel chief investment officer George Herman.
Mboweni, in his last budget speech in February, said the SA Revenue Services was expected to collect R1.21-trillion in taxes, which is about R213-billion less than the 2020 budget expectations.
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