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Godongwana’s Maiden S. Africa Budget Delayed for Second Time

Godongwana’s Maiden South Africa Budget Delayed for Second Time

South Africa’s government delayed Finance Minister Enoch Godongwana’s maiden budget for a second time.

Godongwana will deliver the medium-term budget policy statement on Nov. 11, a week later than previously announced, parliament spokesman Moloto Mothapo said on Twitter. The closely watched speech usually takes place in late October and had been rescheduled to Nov. 4 to accommodate municipal elections initially planned for the same period.

The further delay follows a decision to shift the election to Nov. 1, the National Treasury said in an emailed statement. Investors are looking to Godongwana’s budget for direction and clear strategies on reducing debt and lowering the deficit. 

“Markets are depressingly used to these delays, but they erode confidence and price discovery given the length of time there is in each MTBPS cycle in government to get things right,” said Peter Attard Montalto, head of capital markets research at Intellidex. “Treasury needs to transparently lay out the real reasons for the delay, which in this case are of importance to the market.”

The rand traded 0.1% weaker at 14.7304 per dollar by 12:55 p.m. in Johannesburg.

A business sentiment index compiled by the South African Chamber of Commerce and Industry dropped to a one-year low in September as economic activity continued to be hamstrung by restrictions to curb the coronavirus pandemic and unease persisted following deadly riots in July.

Tax Windfall

The budget is being set within a tight framework, though a windfall in revenue from mining companies benefiting from high commodity prices and changes to the way in which gross domestic product is calculated is likely to led to an improvement in key fiscal metrics.

Tax and mineral royalty revenue is expected to overshoot estimates by 169 billion rand ($11.5 billion) this year, Absa economists led by Peter Worthington said in a note. “The request from National Treasury to change the date of the MTBPS suggests that important fiscal issues are still to be finalized, in particular how much of the fiscal windfall to spend this year.” 

The new forecasts will likely show a balanced primary budget in the 2023 fiscal year, compared with the government’s February estimate of a deficit of 1.9% of gross domestic product, according to BNP Paribas. 

©2021 Bloomberg L.P.