While markets reacted generally positively to the 2022 Budget delivered by Finance Minister Enoch Godongwana, Fitch Ratings expressed doubt that National Treasury has the ability to contain government spending pressures.
The statement released on 23 February noted that South Africa continued to “breach expenditure ceilings, pointing to difficulties in containing spending.”
Over the past financial year the country’s public finances enjoyed a revenue overrun of R180 billion, and this has improved the surface look of the said finances. But the underlying structural problems, and various pressure points, remain.
In light of the announcement in President Ramaphosa’s 2022 State of the Nation Address, that the R350 Covid-19 social relief grant would be extended until the end of March 2023, government will breach its expenditure ceiling in the 2023/24 financial year. On this specifically, Fitch said, “Although we anticipated the breach this year, it raises questions about the government’s ability to pursue fiscal consolidation if revenue forecasts disappoint or other fiscal risks materialise.
“So far, government initiatives and progress on implementation has been insufficient to make [economic growth] likely,” the statement read. The temporary reprieve afforded to the country by a recent commodities boom will likely not last long, and Fitch does not believe that the necessary reform has taken place to place the country on a better economic footing going forward.
Image: GCIS, https://www.flickr.com/photos/governmentza/51899826130/