The unusual circumstances caused by the Covid-19 pandemic and saw the government scrambling for money to mitigate its effects has resulted in the treasury postponing the medium term budget policy statement (MTBPS).
But economists say there is no need for concern.
The budget was to have taken place next week, on 21 October. Mboweni has asked the speaker of the National Assembly, Thandi Modise, for a postponement to 28 October. Parliament sent a statement last night saying the National Assembly programme committee will consider and finalise the request.
Isaac Matshegho, an economist at Nedbank, said speeches are postponed for different reasons and there would be a concern if the postponement was for a longer period.
Last year the MTBPS was postponed by a week to accommodate Finance Minister Tito Mboweni’s and President Cyril Ramaphosa’s international commitments.
A statement released by the treasury on Wednesday said Mboweni 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 2020. The ministry of finance and national treasury have had to adjust the approach and consultation of the budgetary process.”
The MTBPS sets out the policy framework for the main budget, updates the treasury’s economic projects and adjusts the budgets of departments.
Isaah Mhlanga, the chief economist at Alexandra Forbes, said there is not much to worry about regarding the postponement, adding that there perhaps might have been some details that needed to be finalised ahead of the announcement of the economic plan.
Tomorrow, Ramaphosa is due to present the South African Economic Reconstruction and Recovery plan to parliament.
The recovery plan has been widely discussed by government and social partners at the National Economic Development and Labour Council. A draft was tabled at the cabinet lekgotla on 7 and 8 October.
Building infrastructure, localisation of production and re-industrialisation will be used to stimulate economic activity, according to the recovery plan, which the Mail & Guardian has seen.
The economy, already in a recession before the pandemic, has plummeted as a result of the Covid-19 lockdown regulations.
The unemployment rate (using the expanded definition) was 42% in the second quarter of 2020. Gross domestic product (GDP) is expected to contract by 8.2% in 2020, according to the South African Reserve Bank’s estimates and the country’s debt is likely to rise to R4-trillion, or 81.8% of GDP.
Mhlanga thinks the government will not achieve the targets it set out in previous budgets, such as cutting the minimum wage bill by R160-billion over the next three years and government spending by R230-billion over two years.
“I think it’s too aggressive and it’s not possible”, he said.
Matshego said the country is facing a tough time and for this reason the mid-term budget will be closely watched.
He added that the treasury has a lot of work to do and needs to ensure the budget is consistent with the economic recovery plan.