Finance minister Enoch Godongwana is in a bind as he reworks South Africa’s budget.
Enoch Godongwana is in a bind as he reworks South Africa’s budget in the face of lower-than-expected tax revenue and pressure from the ANC to bolster government services ahead of next year’s crunch elections.
The government is likely to collect R52-billion less tax than projected in February, according to the median estimate of economists surveyed by Bloomberg. They also expect the consolidated budget shortfall to be 5.3% of GDP in the current fiscal year, wider than national treasury’s projection of 4%.To balance the books, Godongwana has signalled that he will trim spending and raise borrowing when he delivers his medium-term budget statement in Cape Town on 1 November.
President Cyril Ramaphosa and the ANC have pushed back against austerity measures, an unsurprising response given that opinion polls show the party risks losing its national majority in the upcoming vote for the first time since it took power in 1994.“The problem with debt is the capacity of the economy to service it,” Godongwana said in a speech over the weekend, in which he revealed that the treasury will be forced to raise additional funding to limit expenditure cuts.
State-owned logistics company Transnet, whose inability to provide adequate services is proving a major constraint on exports and economic growth, is also pressuring national treasury to assume part of its R130-billion of debt — as it did for struggling power utility Eskom.
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