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south africa

Executive Summary:

  • MTBPS to reflect a rosier fiscal picture than previously anticipated
  • Surplus mining profits are expected deliver a R140-169bn tax windfall, supporting a narrowing of the deficit to 6.5-7.1% vs 9.3% forecasts in Feb
  • Grants will be the core focus of the meeting with markets concerned about the permanence of a basic or 'family grant' framework
  • We see FinMin Godongwana favouring a targeted job-seekers grant (R30-35bn) and keeping SOE bailouts to a minimum (R13-15bn

Full preview here:

MTBPS Final 11.11.21.pdf

This week, Finance minister Godongwana will produce his maiden MTBPS against a far rosier fiscal backdrop than in recent meetings, but don't let that fool you into thinking the purse strings will be any looser. Aided by windfall profits in the mining sector on the back of a commodity super cycle, the Treasury is set to see some reprieve after years of deteriorating fiscal metrics - providing the new Finmin with a more robust platform to (hopefully), in his own words, "not let this opportunity go to waste."

Godongwana will report back on progress made on the Feb 2021 objectives, while guiding towards the next set of changes that will inform the updated budget framework in 2022. The market's focus will likely be on discussion surrounding the feasibility of a basic income/targeted jobseekers grant, potential growth-inducing reforms, slightly narrower issuance targets, public sector wage frugality, limited SOE bailout packages and discussion of Eskom just transition & debt management strategies.

Overall, markets anticipate the budget to be a well-balanced affair under Godongwana, who has thus far followed a similar trajectory to his predecessor Mboweni. Since taking office, Godongwana has kept a firm hand on the fiscal reins, showing limited appetite for unaffordable populist expenditure strategies, and instead favouring a growth-inducing structural reforms approach that fits well with SA's constrained budget parameters.

MNI London Bureau | +44 020-3983-7894 |
MNI London Bureau | +44 020-3983-7894 |

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