Minister Tito Mboweni will deliver the Budget Speech on Wednesday.
Finance Minister Tito Mboweni will present what many say will be the most important budget of the democratic era in Parliament on Wednesday. He will have to balance the urgent need for stimulating economic growth with the necessity to cut costs across government.
Some civil society organisations, including labour are calling for a pro-poor budget that also protects jobs.
The South African Federation of Trade Unions (SAFTU) General Secretary Zwelinzima Vavi has met in Cape Town with organisations that represent the unemployed in the country, in what they call the “Assembly of the Excluded”.
Vavi says this is in preparation for their picket during Mboweni’s budget speech. He says they will present suggestions to Parliament on formulating policies to grow the economy.
“We are saying basically government proposals have dismally failed the black young people in this country, and we think that government must now look at alternative proposals from people who are affected by unemployment themselves, to say to government abandon your austerity programs, abandon your neoliberalism and embrace a people-centered budget, a budget that will stimulate economic growth and be redistributive.”
Mboweni will deliver the budget under tough economic conditions. Tax experts say the government is running out of options to collect revenue. They say Mboweni will have to scratch hard to find money to keep the country going.
According to the experts, the collection of revenue from traditional sources has been exhausted and new options are limited. In the Medium Term Budget Policy Statement in October, revenue shortfall for the current financial year was projected at R53 billion.
“It’s clear that the major challenge is balancing government books and there is far too much expenditure on the government side and too little revenue coming. In fact, revenue and VAT look like it will be below expectation and the options for government, therefore, are very, very limited and it does look like there will be additional personal income tax increases which are politically acceptable because they hit higher earners than lower earners,” says Independent Political Economist Daniel Silke.
The minister will be mindful of a possible downgrade by rating agencies. Moody’s is the only major agency to still have South Africa’s credit rating above junk status. It recently revised South Africa’s growth forecast for the year down from 1% to 0.7%.
Moody’s is expected to announce its decision on the country’s credit rating next month. “It’s not going to be a pleasant year or two ahead of us, the finance minister has, as in other years, a very tough task but this year is really the tipping point year because if we don’t implement what we say this year, we are not only going to be downgraded by Moody’s, we’ll probably see more downgrades along the line because our believability is very thin with the rating agencies. We must just remember that the rating agencies are not just rating us for themselves, they are rating us, for fund managers and pensioners in other countries who make decisions on that rating relative to other countries,” says Independent Economist Mike Schussler.