AMONG other things, Tito Mboweni’s maiden budget speech this week will be a test to see if he is a man of his tweets, according to the independent business community, Sakeliga.
In a letter this week to Sakeliga members, CEO Piet le Roux writes that one key measure of the new finance minister’s medium term budget speech will be his vision for the size of government.
“Does Mboweni believe that government should expand or contract? If he acknowledges the looming fiscal and economic crises for what they are, he will speak of tax restraint in order to stimulate the economy, expenditure cuts in order to halt the slide into debt, and reforming state procurement to make it less race-based and more efficient. Those would be positive signals.”
Le Roux stresses that there are also ways in which Mboweni’s message can convey strong negative signals: “It will be disastrous if Mboweni turns out to be a man of his tweets and confirms, as finance minister, his support for policies such as 40% state ownership of mining companies, a state bank, a sovereign wealth fund, and significantly greater state ownership of land. The last thing the economy and the Treasury needs, is a finance minister who proudly draws his policy insights from Marxist-Leninist theory, the national democratic revolution and radical economic transformation.”
Le Roux points to the dire state of the fiscus: “The South African state is experiencing serious fiscal stress. It has exhausted the leeway provided by the high tax revenue years preceding the financial crisis of 2008/9. Not counting significant off-balance sheet items, such as government guarantees of parastatals such as Eskom’s debt, the South African government has accrued between R100 billion and R250 billion in debt per year for the past decade. To attenuate the fiscal crisis, Mboweni will have to present a plan to, at the very least, reduce the budget deficit to below R100 billion per year.”
Le Roux concludes: “Where Mboweni takes the Treasury on Wednesday remains to be seen. If he heralds deep spending cuts and the freeing-up of resources for the private sector, we might get our hopes up. If he, instead, preaches what he tweets, and confirms his faith in greater government intervention in markets (as if it would be different this time) we should be weary indeed.”
The budget is due to be presented on the 24th of October. After the presentation, Sakeliga will provide further analysis with a focus on the budget’s impact on business, market-freedom, investment, employment and tax.