Ratings agencies to keep a close eye on Budget Speech
All eyes will be on Nhlanhla Nene to see whether he sticks to a fiscal path he announced last year.
CAPE TOWN - Ratings agencies will be closely watching Finance Minister Nhlanhla Nene's budget on Wednesday to see whether he sticks to a fiscal path he announced in his policy statement four months ago.
In October last year, Nene pledged to reduce the rate of government spending to help close the gaping gap between income and expenditure.
Chief Economist at Pan African Investment Research, Iraj Abedian, says it's important the ratings agencies aren't rattled.
"We're now on the brink of being downgraded to junk status. One or two mishaps on the fiscal planning or policy announcements will take us full circle back to junk status."
Meanwhile, the African National Congress (ANC's) vision for the economy has been vigorously debated in Parliament with the ruling party being criticised for its policies.
Members of Parliament (MPs) on Tuesday debated steps needed to alter the structure of South Africa's economy.
The ANC's Joanmariae Fubbs has defended the idea of a developmental state.
"The ANC is determined to put measures in place that will decisively implement policy and that will fundamentally alter the structure of the South African economy."
But the Democratic Alliance (DA's) Geordin Hill-Lewis has accused the ANC of being an obstacle to growth.
"The ANC government has proven time and time again that it can't get even the basics right."
The Economic Freedom Fighters (EFF) Mbuyiseni Ndlozi also attacked the ruling party's economic vision.
"Even your government advocates for neoliberalism with passion."
He says economically, South Africa remains colonised.
NENE FACES TOUGH BUDGET DELIVERY
It's likely to be a trial by fire as Nene finds himself in the most difficult position of almost any finance minister over the past 20 years.
A sluggish economy and lower-than-expected revenue means he's faced with difficult choices.
A year ago, the economy was making a modest recovery from five years of recession and now it's in trouble again.
Faced with massive demands on the public purse, Nene has little choice but to raise taxes to find the money he needs.
Abedian, says this too could take its toll.
"Raising taxes won't necessarily bring much revenue but it will further reduce the confidence in the economy and potentially, depending on which taxes they go for, could possibly also stop growth even further." LISTEN: Chief Economist at Old Mutual Investment Group, Rian le Roux, says the most important thing to watch for tomorrow's budget is clear evidence of convincing fiscal consolidation.
LISTEN: Chief Economist at Old Mutual Investment Group, Rian le Roux, says the most important thing to watch for tomorrow's budget is clear evidence of convincing fiscal consolidation.
WHAT WE COULD EXPECT:
Alternative measures have been proposed to increase South Africa's tax revenue without changing vat.
Reports suggest he may introduce a significant hike to the fuel levy in an attempt to address budget deficits.
With load shedding, labour disputes and unemployment plaguing the country's economy, it is reported that Nene will need an extra R12 billion to fund this year's budget.
Chief economist at Econometrix, Azar Jammine, on Tuesday said a list of innovative solutions to Eskom's power crisis should be a top priority, saying government should be looking at ways to finance the expansion of Eskom's facilities and rectify additional parastatal organisations that are undergoing traumatic experiences at this stage.
The cash-strapped parastatal needs billions to fund its massive build programme.
Economist Nazmeera Moola says any financial bailout for Eskom should come with conditions.
"I think what he is likely to do is provide some sort of solution for Eskom going forward but I would hope the solution the treasury will come to is conditional on Eskom sorting out its operational issues."
Click here to view our budget forecast.
Click here to see our 2015 budget cartoon.