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SOUTH AFRICA: Budget Deal Mooted But Remains To Be Sealed

SOUTH AFRICA
EM BulletHomepagemarkets-real-timePolitical RiskPolitical Risk BulletBulletEmerging Market News
  • Budget negotiations between the African National Congress (ANC) and the Democratic Alliance (DA) are down to the wire, with News24 reporting earlier today that the two parties are yet to reach a deal, as the Cabinet prepares for a meeting this afternoon to discuss the final draft of the spending plan. The DA reaffirmed its red lines, with its leader John Steenhuisen telling Bloomberg that the party could only support the revised budget if it met certain criteria, including a focus on growth, while confirming that another delay is unlikely. Bloomberg had earlier reported that there was potential for a political deal, whereby the Treasury would lower its original VAT hike proposal to 0.5pp from 2pp in exchange for a review of spending. According to the Sunday Times, Finance Minister Godongwana is adamant that a tax hike is needed to continue funding the Social Relief of Distress (SRD) grant and hence "half-percentage point rise [in the VAT rate is] mooted for this and next two years."
  • South Africa went through another bout of loadshedding, briefly implementing Stage 3 outages over the weekend. Electricity and Energy Minister Kgosientsho Ramokgopa apologies for the "gross inconvenience" and a "significant setback" and blamed the recent flare-ups in loadshedding on Eskom management rather than just technical factors. The utility warned that further outages are possible due to the planned pre-winter maintenance drive.
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  • Budget negotiations between the African National Congress (ANC) and the Democratic Alliance (DA) are down to the wire, with News24 reporting earlier today that the two parties are yet to reach a deal, as the Cabinet prepares for a meeting this afternoon to discuss the final draft of the spending plan. The DA reaffirmed its red lines, with its leader John Steenhuisen telling Bloomberg that the party could only support the revised budget if it met certain criteria, including a focus on growth, while confirming that another delay is unlikely. Bloomberg had earlier reported that there was potential for a political deal, whereby the Treasury would lower its original VAT hike proposal to 0.5pp from 2pp in exchange for a review of spending. According to the Sunday Times, Finance Minister Godongwana is adamant that a tax hike is needed to continue funding the Social Relief of Distress (SRD) grant and hence "half-percentage point rise [in the VAT rate is] mooted for this and next two years."
  • South Africa went through another bout of loadshedding, briefly implementing Stage 3 outages over the weekend. Electricity and Energy Minister Kgosientsho Ramokgopa apologies for the "gross inconvenience" and a "significant setback" and blamed the recent flare-ups in loadshedding on Eskom management rather than just technical factors. The utility warned that further outages are possible due to the planned pre-winter maintenance drive.