Expect budget changes by new ANC, says economist
The new African National Congress (ANC) leadership is likely to make budget changes prior to the election next year, according to Efficient Group chief economist Dawie Roodt.
This comes in the wake of the ousting of President Thabo Mbeki over the weekend and a few weeks ahead of the Medium-Term Budget Policy Statement on October 21.
“I am concerned that some say they will not make changes to policy—I can’t agree because next month we have the medium-term budget and I am convinced there will be changes to that,” said Roodt on Monday.
He noted that there are already some strong points being made around issues such as poverty alleviation.
“I can’t see policy remaining unchanged before the national election. I can’t think how the new guys will miss an opportunity to make changes in the budget,” he said.
Treasury Director General Lesetja Kganyago last week questioned the source of recent talk that the fiscal surplus in the country had suddenly disappeared.
“Who stole the surplus? Who said it was gone?” he asked. “In 34 days you will know what we will do with expenditures in the next few years,” he added.
The Medium-Term Budget Policy Statement has been set down for Tuesday October 21, when Finance Minister Trevor Manuel will provide more details on the state of government financing and plans.
According to news on Monday, Manuel is not resigning in the wake of the sudden political changes.
South Africa now adopts a counter-cyclical fiscal strategy that ensures the country saves in the good times to ensure there are no problems when times get tough, with a fiscal surplus thus providing a buffer against tougher climes.
There has been criticism of this policy in some quarters, however, saying South Africa’s development goals mean a deficit and higher spending should ensue. Key ANC alliance partners the Congress of South African Trade Unions and the South African Communist Party are known to be against the budget surplus and inflation targeting.
The Treasury reported in February that the originally estimated consolidated fiscal surplus of 0.8% of gross domestic product (GDP) for 2007/08 had been revised to a surplus of 1% of GDP.
The surplus is then seen at 0,8% of GDP in 2008/09, at 0,6% of GDP in 2009/10 and at 0,7% in 2010/11.
The surplus is set to average 0,7% a year over the next three years.
Updates on all of these numbers will be keenly monitored by the markets.—I-Net Bridge