Despite Finance Minister Tito Mboweni’s delivery of the Budget earlier this week having been “fair from a numbers perspective”, the difficulty remains in the implementation of the Budget, Sigma Capital executive chairperson Phuti Mahanyele said during a panel discussion on Friday.
According to Mahanyele, “it is one thing to have the numbers and to have the intent”, but having the right resources and ensuring implementation remains a vital factor.
FirstRand Limited COO Mary Vilakazi also welcomed the Minister’s “very sober take on the South African balance sheet and position”, especially with regard to the upcoming elections in May, and with South Africa’s investment grade hanging in the balance.
She added that, especially with the challenges that have been brought up, the Budget, was one that should have been delivered two to three years ago.
“But we are where we are now and hopefully we will implement a lot of the actions [listed in the Budget],” she said, adding that she believes South Africa is “on a path of recovery”.
PricewaterhouseCoopers (PwC) chief economist Lullu Kruger agreed with Vilakazi, adding that South Africa would have “been in a very different position” if the 2019 Budget had been delivered a few years ago.
“The right things are being done, but it is too late to make a difference immediately – it will take some time,” she said.
From a tax perspective, however, PwC tax policy leader Kyle Mandy said this year’s Budget gives one “the strong sense that [the National] Treasury has run out of ideas on the tax front”.
He lamented that the market perception is that the tax increases in the Budget “are not really tax increases” and that the movement in the tax bracket is a good thing. He argued that this is not the case, and that “there are a few things that have been missed in this Budget” with its focus on restabilising the embattled State-owned Eskom.
According to Kruger, the warning signals for South Africa’s investment position are becoming a lot stronger.
She referred to ratings agency Moody’s forecast that South Africa will “find it extraordinarily difficult to achieve the 4.5% deficit forecast for next year” as it will be tough to reduce its expenditure in the way that is envisaged in the current environment.
Mandy added that the reason for Moody’s view is owing to South Africa’s credibility when it comes to forecasting and, in particular, forecasting revenues.
“If you look at the tax buoyancies that have been used in the Budget, as a general proposition – they don’t look unreasonable. But when you compare it to the buoyancies that we’ve achieved over the last few years, there’s a significant risk again that we’re not going to achieve those forecasts,” he explained.
According to Mandy, the 2019 Budget gives the sense that, “Treasury is putting its hopes on the South African Revenue Services’ (Sars’) ability to collect revenues.”
In this respect, Mandy believes that, while it may be on a path of hope, it will still be a long while - more than a year or two - before Sars has the ability to collect revenues and get its compliance back up to the level it was at five years ago.
Commenting on the possibility of a downgrade by Moody’s, Mandy said South Africa would most likely be on negative watch.
“I think Moody’s will still give us some benefit of the doubt, depending on what happens with the elections in May.”
According to Vilakazi, South Africa will need to implement everything “that’s on the table” before it is able to reach a turning point.
Sars’ recovery and policy certainty will be key to this, she said.