SA Medium Term Budget Policy Statement (MTBPS)

SOUTH AFRICA - In Brief 26 Oct 2022 by Iraj Abedian

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In today's much anticipated Medium Term Budget Policy Statement, South Africa's Minister of Finance tabled a medium term strategy meant to deal with some of the country's chronic fiscal uncertainties. Amongst them were Eskom's massive R400 billion debt, the Public Sector wage bill, the rising pressure for the introduction of a national basic income grant, and the ongoing fiscal support the troubled State-Owned  Enterprises (SOEs). After a decade of political gymnastics, today the Minister confirmed that the National Treasury is going to take between 1/3 to 2/3 of Eskom's R400 billion on public debt. This is going to be finalised through a process led by the National Treasury by the end of February 2023. As we highlighted in our recent Investor Raodshow, the actual amount will be between R200 to R250 billion. This will automatically raise the debt/GDP ratio at a time that the GDP growth rates are lowered to 1.9% from the previous estimate of 2.2%. Meanwhile, the rising interest rates will add additional pressures on debt-service charges over the medium term.  Apart from Eskom, the other SOEs likewise received fiscal bail out, albiet at a much lower levels. Transnet, Denel and SANRAL(SA National Road Agency) received a total of R9 billion fiscal support. This was a policy reversal given that Minister Godongwana's predecessor had promised an end to fiscal bail out of the SOEs.    On the public sector wage bill, the Minister held the line by offering a 3% pensionable annual increase together with a once-off cash payment of R1000, adding up to 7.5% this year. For the medium term, however, the proposed 3% annual wage increases is to be below the expected CPI of 4.5%.  The pr...