There’s a very bitter irony to the fact that the Mid Term Budget Speech always falls within a few days of Halloween. On Wednesday, it’s quite likely Tito Mboweni could tell us all a horror story.
The economic picture doesn’t look too clever for South Africa at the moment. Cyril Ramaphosa’s eight-month presidency hasn’t yielded the overnight successes some (naively) predicted. The head of state will have to play a long game to get the country back on track, and Mboweni faces his first major hurdle.
There’s plenty to discuss on Wednesday, but Mzansi needs substance over style. With not much money to play with, the new finance minister is going to have to find ways to shift the cash about. Here’s what he will need to address head-on during his speech:
Mid Term Budget Speech – What Tito Mboweni
If this government is serious about saving money, there has to be an acknowledgement that the cabinet is simply too big. With 35 ministers, it ranks as one of the most bloated in the world. This is a favoured topic of the opposition parties, and failure to discuss this issue wouldn’t do Mboweni any favours.
Although cutting the cabinet by ten members, for example, wouldn’t save South Africa megabucks, it could certainly put a few million back in the depleted kitty. What is more, making these reductions would be the ANC’s clearest signal yet that they still have the capacity to “self-reform”.
Always a big one at any Mid Term Budget Speech. However, Tito Mboweni is more than likely to have some bad news for us. Several forecasters, including World Bank, have already revised their growth predictions for South Africa this year. Given our recession status, the Treasury is likely to follow suit.
Growth of 1.5% was predicted by Malusi Gigaba’s budget in February. That’s expected to be trimmed to something nearer the 1% mark. It’ll be worth keeping an eye on the rand’s performance, too. Whenever the GDP performance takes a knock, so does our currency.
Land and agricultural developments
The Banking Organisation of South Africa admitted that they’re getting itchy feet over land expropriation, and need to know more about how the process will be structured and funded. Granted, the ANC is following a non-compensatory model, but it’s still a policy change that will rack-up costs.
Mboweni is going to have to address the government’s land policy, and what funding is needed to facilitate such a radical economic transformation (bet you haven’t heard that term in a while, hey?).
There was a sharp decline for the agriculture, forestry and industry in the last quarter. It’s reported that the micro-economy declined by a whopping 29.2% in total, and accounts for a -0.8% loss towards the country’s GDP in Q2. Bold measures are needed to kick-start this ailing sector.
How will we fund the stimulus package?
The package is said to be worth about R50 billion in total and involves a multitude of strategies to revive the economy. The mining charter, utility tariffs, job creation and infrastructure development were all identified as areas that need urgent revision by Cyril Ramaphosa in September.
One of South Africa’s biggest hot-button issues should not escape Mboweni’s attention, either. Seven consecutive fuel price hikes have left commuters apoplectic, as petrol has shot up from around R13 per litre to over R17 a litre inland since the previous budget speech.
There could be some relief in November, with the price of crude oil dropping by about 10% in the last few weeks. However, Mzansi needs a coherent strategy to tackle the threat of rising petrol prices, given the volatile nature of the US / Middle Eastern political situation.
Energy Minister Jeff Radebe has called together a governmental team, made up of parties representing the Department of Energy and the Central Energy Fund (CEF), which is tasked with investigating the possibility of implementing a price ceiling on unleaded petrol.
If the government is singing from the same hymn sheet, Mboweni may also have to look for a way to support the establishment of a “maximum” petrol price. Go on, be a hero…
Finally, one of the biggest problems facing South Africa has to be raised on Wednesday. Especially as Cyril Ramaphosa’s pet project – the YES initiative – is focused on getting businesses and government to create new jobs designed specifically for the younger workforce.
Youth unemployment (ages 15 – 24) stands at an eye-watering 52% at the moment, about 25% above the national average. If Tito Mboweni does have few bucks to spare, this is an issue likely to rank highly on the Mid Term Budget Speech agenda, in order to bring some form of relief to the millions of jobless hopefuls.