SA Budget Preview: (3/3)

SOEs: Hopefully, no easy handouts outside of going concerns

• Eskom, SAA, Denel, SABC, Land Bank & SA Express continue to be a major drag on the fiscus in need of structural reform. We may see more funding allocated to those of immediate concern (Land Bank & Denel) needing ~R6-8bn total to remain liquid. Eskom remains a major concern and measures including prescribed assets (regulation 28) or a joint venture with the PIC stand a chance of being discussed, but this may be a tad premature

SUMMARY

• Overall, a more positive picture at this budget, but markets will react negatively to any signs of complacency or deceleration on expenditure curbs/concerns. Mboweni is unlikely to waver in his hardline approach, which is unfortunately often tempered by poor Govt implementation.
• Key determinants will be reform credibility, commitment to October fiscal goals, and a balanced approach to taxation.