All eyes will be fixed on South African Finance Minister Malusi Gigaba this week when he delivers his first Medium-Term Budget Policy Statement (MTBPS) amid concerns about the fiscal challenges, widespread perceptions of government corruption and wasteful expenditure.

Gigaba, who took over the reins of National Treasury following the controversial firing of Pravin Gordhan in April, will have his work cut out as he sets out the fiscal policy objectives and spending priorities over the three-year expenditure period.

The finance minister will have to pull a rabbit out of the hat on Wednesday in order to rein in government’s more than R2-trillion debt while allocating funding to higher education, social welfare, and infrastructure projects, including the controversial nuclear build.

The South African Revenue Services (Sars) is already under pressure with reports suggesting that it may not be able to meet this year’s target. Projected tax income for the 2017-18 fiscal year is R1.41-trillion and the proposed expenditure R1.56-trillion.

Allegations of misuse of workers pensions, which total almost R1.9-trillion in the Public Investment Corporation coffers has sent jitters through South African markets.

For these reasons and others, managing partner at Deloitte Africa tax and legal services, Nazrien Kader, said this year’s MTBPS was expected to come under far greater scrutiny than usual.

“This year, allegations of ‘State capture’ and corruption in South Africa occupy the world stage, while the South African government remains pre-occupied with bailouts for state-owned entities – even while economists estimate that revenue collections will fall short of budgets, continuing the steady downward trajectory from an estimated shortfall of R30-billion earlier in the fiscal year to between R50-billion to R65-billion more recently, and rating agents have the country on watch,” Kader said.

Kader said that issues such as government incentives and allowances, carbon tax, sugar tax, the National Health Insurance (NHI), and South Africa’s ranking in the World Bank’s Competitiveness Index, were expected to be key themes in this year’s MTBPS.

Ettiene Retief, the chairperson of national tax and Sars committee of the South African Institute of Professional Accountants, said that Gigaba must be able to convince international markets that all is under control.

Retief said the lack of accountability in terms of wasteful and fruitless expenditure continues to erode tax morality in South Africa, and that taxpayers will have to be convinced that expenditure incurred by the government is “reasonable”.

“Tax collections in all three of the major tax types (Personal Income Tax, Value Added Tax and Corporate Income Tax) are expected to be lower than expected in February,” Retief said.

“South Africans will need clarity on how Minister Gigaba is going to adjust his budget and whether he will be mindful of the additional cost of increased borrowings to make up for the anticipated tax collection shortfall. They will also need assurance that government will keep expenditure in check, and even cut costs at non-performing entities.”

Meanwhile, political instability may rise around the African National Congress’s presidential elections at the end of this year, and in the run-up to national polls in 2019.

Sovereign credit rating agencies will be watching out for any political ructions. Moody’s, Fitch and S&P Global Ratings downgraded the country’s sovereign credit rating following President Jacob Zuma’s axing of Gordhan as finance minister at the end of March.

All three agencies have warned that low growth at struggling State firms heavily reliant on government bailouts poses significant risks to the country’s ratings.

Moody’s and S&P are scheduled to review the country’s ratings on 24 November.