SA finance Minister had to adjust his medium-term budget due to Covid hit economy
Finance Minister Tito Mboweni has written to Parliament requesting the Speaker of the National Assembly to enable him to postpone the medium-term budget by a week.
In a statement on Wednesday, the National Treasury said Mboweni now wants to table the 2020 Medium Term Budget Policy Statement (MTBPS) on Wednesday October 28.
The MTBPS, which sets out South Africa’s macroeconomic policy in the medium-term, was initially scheduled for tabling on Wednesday, October21.
Treasury said that the Speaker Thandi Modise has acceded to the request subject to the approval of the Parliamentary Programming Committee.
It said that Mboweni has had to adjust the approach and consultation of the budgetary process due to Covid-19 induced economic downturn.
“The Minister has made this request having taken into consideration the complex and unusual circumstances visited upon us by the Covid-19 pandemic, which included the tabling of a Supplementary Budget in June.”
Mboweni’s budget will be closely watched by jittery investors and credit rating agencies on how the government plans to curb spending and rein in the growing public debt and fiscal deficit.
The economy is expected to contract by 7.2%in 2020, the largest contraction in nearly 90 years.
The gross national debt rising to R4 trillion($240bn), or 81.8% of GDP by the end of this fiscal year.
The government plans a debt stabilisation programme through zero‐based budgeting that will narrow the deficit and stabilise debt at 87.4% of GDP in 2023/24.
Treasury on Wednesday said the government was determined to maintain a prudent fiscal stance which is in the best interest of the country in the medium and long-term and the MTBPS will reflect this position.
South Africa’s sovereign credit rating has been downgraded below investment status by all three major rating agencies as the country’s fiscal position continues to deteriorate.
Ahead of Mboweni’s budget, President Cyril Ramaphosa will tomorrow unveil the widely consulted Economic Reconstruction and Recovery Plan to Parliament.
Ramaphosa’s plan comes after extensive consultations with various stakeholders after the Covid-10 plunged the economy into an unprecedented crisis in the second quarter, with 2.2 million jobs lost during the period.
The markets have been jittery and closed in the red yesterday as rising numbers of Covid-19 cases worldwide and concerns about a halted coronavirus vaccine trial weighed on investor sentiment.
The JSE All Share index declined 0.9% yesterday to settle at 55 054 index points.
Yesterday, the rand strengthened against the US dollar after the pace of contraction in South African annual mining production eased off in August, hinting that the industry may be one of the first to regain some of the ground lost to the Covid-19 pandemic.
Banks assist 84% of South Africans who applied for financial assistance
SA banks had received 3 196 403 individual applications for assistance up to September 12 and granted assistance to 2 687 320 of the individual customers who applied, the Banking Association of South Africa managing director Bongiwe Kunene said this week.
The Covid-19 pandemic, which has exacerbated the devastation of South Africa’s economy, has hit South African bank clients and commercial and small businesses.
Basa collects data on credit agreements between banks and their customers.
The association also said that 141 505 commercial and small businesses also approached them with applications for financial assistance. Of them, 135 126, or 95%, were assisted.
Mergence Investment Managers investment analyst focusing on consumers Lulama Qongqo said the numbers of people who approached banks because they were in financial distress was shocking considering that it exceeded the number of people who lost their jobs in the second quarter of this year.
Last month, Statistics South Africa’s Quarterly Labour Force Survey (QLFS) for the second quarter this year showed that the number of employed persons decreased by 2.2 million to 14.1 million compared to the first quarter.
Qongqo said some people were still getting by with the likes of the Unemployment Insurance Fund (UIF) Covid-19 TERS, how erver, going forward, they would lose their purchasing power when these financial aid from the UIF and even banks ceased.
Qongqo said South Africa had not yet seen the caving in of businesses due to the pandemic imposed lockdown because some were still holding on, however at a later stage liquidations would rise.
“When that happens the country will be in a predicament because retail sales that make a significant portion of the country’s gross domestic product will decline.”
The UIF said last month that it had so far disbursed R45 billion($2.72bn) in more than 10.2 million payments through 902 775 employers. At the beginning of this month, the Fund started processing Covid-19 TERS applications for the period covering August 16 to September 15.
In its recent Covid-19 Financial Relief Update, Basa said that as at September 26, banks had provided R49.69bn($3.01bn) in financial relief, R33.61bn($2.03bn) in payment breaks on credit agreements and R16.08bn($970m) under the loan guarantee scheme to South African businesses and individuals who were financially distressed due to the Covid-19 pandemic and national lockdown.
North-West University Business School based economist Professor Raymond Parsons said while it remained essential that banks be allowed as much flexibility to assist small business, financial assistance from the banking system alone would not be enough.
“As much as the commercial banks have only been able to respond unevenly to the needs of business, the business distress trends experienced so far underscore why the announcement of the long-awaited economic reform plan on Thursday is imperative to further help to improve business prospects in South Africa,” said Parsons.