South Africa: Ratings and Post Budget Speech Outlook

Since Finance Minister Tito Mboweni presented the budget speech last Wednesday, media commentary has focused on several dimensions of the public response to priorities outlined therein, and interventions announced to deal with the country's broader economic and financial outlook.

Brand South Africa welcomes the 2019 budget, which, if read in conjunction with President Ramaphosa's State of the Nation Address, provides clear indications of government's intention to create a conducive environment for growth, increased investor confidence, ease of doing business in South Africa, and fiscal discipline.

Minister Tito Mboweni indicated in the Budget Speech that, "Our determination to regain our fiscal prudence will form the basis of our economic recovery... Restoring our finances and fixing our state-owned enterprises will take great courage."

The two themes that emerge from the 2019 Budget Speech, revolved around 1) acknowledgement of challenges, and 2) commitment to change. This was made evidently clear by the Minister's insistence on the need to take the bitter with the sweet, and thus to engage interventions, and structural reforms, which will set the country on a path of recovery.

Media reports following on the Budget Speech, for example, refer to the concerns expressed by credit ratings agency Moody's, that focus on government's limited fiscal flexibility, in a challenging economic environment of continued slow GDP growth.

The crux of concerns raised by economic analysts, is what they see as an erosion of South Africa's fiscal strength since the October medium-term budget. Furthermore, due to serious challenges at key SOEs, they expect government deficits to increase in the long term.

Brand South Africa would like to caution against pre-emptive pronouncements on the outlook for South Africa's credit rating prior to the final announcement by Moody's, expected on 29 March 2019. As indicated by the Minister, steps announced in this budget pave the way for immediate and long term interventions which will not only stabilise the country's fiscal position, but will address concerns related to SOEs.

In the restructuring of ESKOM and as it reviews SOE's, government will consider the sale of non-core assets and pursue Private-Public Partnerships. This can improve efficiency, and in the long term reduce reliance on state funding. In managing the public wage bill, the first step is to allow older public servants to retire early which is projected to save the state more than R20 billion over the next three years whilst creating employment opportunities.

In his State of the Nation Address, President Ramaphosa indicated that South Africa wants to be in the top fifty nations in the World Bank Ease of Doing Business Index. In order to stimulate growth, Minister Mboweni mentioned "Government's policy actions aim to end the uncertainty that has undermined confidence and constrained private sector investment. The R300billion worth of pledges made at the Investment Conference last year demonstrates that there is pent-up private sector demand if we grab hold of the opportunity."

In a statement released by Business Leadership South Africa, post the budget speech; "In BLSA's view, the recommendation to this year's budget was its commitment and credible action in cutting back on wasteful expenditure, reducing the public wage bill, decisively eradicating theft of public resources, and the deliberate focus on debt and debt servicing costs"

"We are encouraged that our Finance Minister unambiguously declared that there are no freer lunches for SOE's -and executives as well as individuals", said Mohale, CEO of BLSA. He added that "SOE's must be self-sustainable and not dependent on government handouts since support for Eskom will come with tough conditions. This must not just be for Eskom but all other SOE's and municipalities, because there is simply no room within this fiscus to spend our way out of a growth constrained environment".

Based on both the State of the Nation, and Budget speech it is clear that government is committed to addressing the fiscal position.

Yesterday, the President released a statement announcing the establishment of a Special Investigations Unit Tribunal. This Unit will be responsible for fast-tracking investigations on corruption and irregular expenditure in the private and public sectors. At least seven judges have been appointed to lead these investigations. This once again proves the commitment to root out corruption in all sectors.

Brand South Africa remains confident that efforts to capacitate the economy, will ensure a turn-around in the economic performance of the country. Citizens are encouraged to unite and support the nation brand. The time to stand together is now.

About Brand South Africa

Brand South Africa is the official marketing agency of South Africa, with a mandate to build the country's brand reputation, in order to improve its global competitiveness. Its aim is also to promote pride and patriotism among South Africans, in order to contribute to social cohesion and nation building.

About Play Your Part

Play Your Part is a nationwide programme created to inspire, empower and celebrate active citizenship in South Africa. It aims to lift the spirit of the nation by inspiring all South Africans to contribute to positive change, become involved and start doing. A nation of people who care deeply for one another and the environment in which they live benefits everyone. Play Your Part is aimed at all South Africans - from corporates, individuals, NGOs, government, churches and schools, from the young to the not-so-young. It aims to encourage South Africans to use some of their time, money, skills or goods to contribute to a better future for all.

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