Finance Minister, Tito Mboweni, addressed Parliament to table the Medium-Term Budget Policy Statement (MTBPS). He was candid in his assessment of the fiscal situation in South Africa but went to great lengths to explain that a MTBPS is more of a scorecard than an opportunity to implement new reforms. Changes to policy will be implemented in February next year when the National Budget is tabled.
He said that at the currently trajectory, GDP growth is forecasted to increase by 0.5% in 2019 and increase to 1.7% in 2022. This, coupled with a 4% lower than expected tax collection by SARS, the additional R26 billion financial support to Eskom, R11 billion to several smaller state-owned enterprises and an additional R430 million for student housing has meant that the budget deficit is forecast to increase to 5.9% in the current year.
Further concern was raised with the expectation that national debt is due to rise to R4.5 trillion in the next three years, which would result in a debt to GDP ratio of above 70%. Although the minister did stress that this was only if no policy adjustments were made, ratings agencies would take note of this as it would signal a rapid increase in the debt to GDP level.
Eskom and SAA were specifically mentioned in the MTBPS. The plan that has been put in place for Eskom needs to be implemented and it should be run as a business was the message from the minister. Importantly, the minister also proposed that potential future funds to Eskom, above those already approved, should be in the form of a loan, that needs to be repaid with interest. With SAA, he believed that a structural reform is necessary so that the wealthy and middle-class using SAA services are no longer subsidised by the country.
There was clear intent by the minister to show that the current fiscal trajectory of the country is dire and cannot continue. He highlighted that there needs to be an emphasis on using resources efficiently so that financial imprudence is curtailed. He also opened the door to the introduction of policy amendments in the 2020 budget to help promote a turnaround in the current fiscal situation.