Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      Crypto is becoming a ‘practical payment method’ in South Africa

      24 June 2025

      Siemens is battling Big Tech for AI supremacy in factories

      24 June 2025

      Tesla shares soar after first robo-taxi rides hit the road

      24 June 2025

      ‘System offline’ scourge to end, says Schreiber – but industry must pay

      23 June 2025

      Why the spectrum gold rush may soon be over

      23 June 2025
    • World

      Mira Murati’s Thinking Machines hits $10-billion valuation

      24 June 2025

      Watch | Starship rocket explodes in setback to Musk’s Mars mission

      19 June 2025

      Trump Mobile dials into politics, profit and patriarchy

      17 June 2025

      Samsung plots health data hub to link users and doctors in real time

      17 June 2025

      Beijing’s chip champions blacklisted by Taiwan

      16 June 2025
    • In-depth

      Meta bets $72-billion on AI – and investors love it

      17 June 2025

      MultiChoice may unbundle SuperSport from DStv

      12 June 2025

      Grok promised bias-free chat. Then came the edits

      2 June 2025

      Digital fortress: We go inside JB5, Teraco’s giant new AI-ready data centre

      30 May 2025

      Sam Altman and Jony Ive’s big bet to out-Apple Apple

      22 May 2025
    • TCS

      TechCentral Nexus S0E3: Behind Takealot’s revenue surge

      23 June 2025

      TCS | South Africa’s Sociable wants to make social media social again

      23 June 2025

      TCS+ | AfriGIS’s Helen Hulett on how tech can help resolve South Africa’s water crisis

      18 June 2025

      TechCentral Nexus S0E2: South Africa’s digital battlefield

      16 June 2025

      TechCentral Nexus S0E1: Starlink, BEE and a new leader at Vodacom

      8 June 2025
    • Opinion

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025

      South Africa risks being left behind as stablecoins reshape global finance

      6 June 2025

      Beyond the box: why IT distribution depends on real partnerships

      2 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CambriLearn
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » News » Little good news expected in this week’s budget speech

    Little good news expected in this week’s budget speech

    By Agency Staff24 February 2020
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp
    Finance minister Tito Mboweni. Image: GCIS

    Finance minister Tito Mboweni’s budget this week is unlikely to convince Moody’s Investors Service that he has a credible plan to rein in government debt.

    Of 19 economists surveyed by Bloomberg this month, 14 expect Moody’s to downgrade the country to junk this year and nine of those say it’ll happen in the first half. That’s after the ratings company in November cut the outlook on the nation’s assessment to negative and said it would look to the 26 February budget for a feasible strategy to contain rising debt.

    Bailouts for state-owned companies including Eskom and South African Airways have pushed up government debt in an economy that’s growing at less than 1%/year and not collecting enough revenue.

    Relying mainly on tax measures to narrow the deficit, as has been done in the past, has become counterproductive

    Pledges by Mboweni to lower spending will be difficult to push through, even after President Cyril Ramaphosa said in his state of the nation address the minister will outline measures to reduce expenditure and improve its composition. Labour costs make up 35% of spending and trade unions have ruled out a review of an existing three-year wage agreement that expires in 2021, saying they won’t accept pay cuts in the next deal.

    Nothing will be done to limit the growth in the wage bill, according to Johann Els, chief economist at Old Mutual Investment Group in Cape Town.

    “While I expect treasury to make an attempt to get the deficit under control and to try and stabilise the debt ratio, I think it is unlikely that they will be able to do enough to prevent a Moody’s ratings downgrade,” he said.

    Scope limited

    The income side of the budget also won’t solve the problem. Revenue collection is forecast to undershoot for the sixth straight year and the minister’s scope to plug the gap by raising taxes is limited by slow economic growth and an unemployment rate near 30%. Only five of the economists surveyed said they expect an increase in the VAT rate.

    After leaving personal income tax brackets unchanged and not adjusting them for inflation in the last budget, Mboweni’s remaining options to increase revenue include adjusting capital-gains tax, levies on fuel and luxury goods, excise duties, and charges on sugar-sweetened beverages.

    “Increasing the tax burden on the economy, as well as cutting government expenditure at the same time, will have a very negative bearing on economic growth,” said Danelee Masia, a senior economist at Deutsche Bank. “Relying mainly on tax measures to narrow the deficit, as has been done in the past, has become counterproductive.”

    That all means the budget deficit could be even wider in the year to 31 March than Mboweni projected in October. According to the median estimate of 24 economist surveyed by Bloomberg, the shortfall for this year will be a decade-high 6.3% of GDP and will widen to 6.4% in 2020/2021.

    Moody’s is scheduled to announce its assessment of South Africa on 27 March. A downgrade would leave the country without an investment-grade ranking for the first time in 25 years. That would cause it to fall out of the FTSE World Government Bond Index, which could prompt a debt selloff and outflows of as much as US$15-billion, according to Bank of New York Mellon.

    While the headline figures in the budget speech will be important, signals from Mboweni that the government has feasible plans to stem the debt and deficit metrics over the medium to longer term “will probably prove more powerful than the near-term deterioration we expect to see in the numbers”, said Jeffrey Schultz, a senior economist at BNP Paribas South Africa. However, that’s unlikely to prevent a junk rating.

    “South Africa’s urgent need for vital structural reform to raise the current trends in potential and nominal GDP is clear,” he said. “As this is likely to take longer to get right than many anticipate, we maintain that a Moody’s rating downgrade is inevitable in 2020.”  — Reported by Prinesha Naidoo and Sarina Yoo, (c) 2020 Bloomberg LP



    Cyril Ramaphosa Danelee Masia Eskom Johann Els SAA Tito Mboweni
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleKorea braces for the worst after Samsung factory closure
    Next Article Interview: New fintech firm changes the way consumers access home loans

    Related Posts

    World Bank set to back South Africa’s big energy grid roll-out

    20 June 2025

    The little-known company disrupting Eskom’s monopoly

    16 June 2025

    Coal to cash: South Africa gets major boost for energy shift

    13 June 2025
    Company News

    Communication costs exploding? Telviva has a fix for UK-SA teams

    24 June 2025

    IoT connectivity management in South Africa – expert insights

    23 June 2025

    Let’s reimagine Joburg using the power of tech, data and AI

    23 June 2025
    Opinion

    South Africa pioneered drone laws a decade ago – now it must catch up

    17 June 2025

    AI and the future of ICT distribution

    16 June 2025

    Singapore soared – why can’t we? Lessons South Africa refuses to learn

    13 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.