Gigaba set for baptism of fire with first budget statement

Fianance Minister Malusi Gigaba will be spelling out the government’s spending plans for the next three years and will have to explain how he intends dealing with rising government debt.

FILE: Finance Minister Malusi Gigaba.  Picture: Christa Eybers/EWN

CAPE TOWN - Finance Minister Malusi Gigaba faces a baptism of fire when he unveils his first medium term budget policy statement in Parliament on Wednesday.

Gigaba will be spelling out the government’s spending plans for the next three years and will have to explain how he intends dealing with rising government debt.

His first major speech since taking over from Pravin Gordhan nearly seven months ago will be closely watched, not least by ratings agencies.

Gigaba is confronted with an economy that’s struggling to grow, huge pressures on the public purse, rampant corruption and doubts about his own credibility.

The Finance Minister not only has to contend with a gaping hole in the budget but also a credibility deficit, with questions over his role in state capture.

Chief economist for Pan African Investment and Research, Iraj Abedian says: “The minister comes in with a massive credibility deficit, which the previous ministers did not have.”

At issue, is whether or not Gigaba will follow the fiscal path set by Gordhan. But he has little room to manoeuvre.

“He’s unfortunately come in at a time when all fiscal and economic indicators are stacked up against him.”

Abedian says that tough decisions have to be made to get the economy back on track. Today will be a test whether Gigaba has the political clout to make them.

GIGABA TO PLAY IT SAFE?

Gigaba is expected to revise the country’s economic growth prospects downward.

While South Africa's emerged from a six-month long technical recession, the economy’s still in the doldrums.

With the African National Congress’ elective conference looming, Nedbank chief economist Dennis Dykes says that Gigaba is likely to play it safe.

“This medium-term budget policy statement will probably be a little bit of a holding game and then we’ll have to see what happens in December. So I’m not expecting anything radical.”

Argon asset management economist Thabi Leoka agrees.

“I expect him to continue with fiscal consolidation. I wish that there were bold moves, given the current fiscal position. He doesn’t have room to manoeuvre.”

Just seven months into the job, Gigaba also has to inspire confidence in his own ability to do the job.