By Sanisha Packirisamy
Sanisha is an economist at Momentum Investments, where she provides macroeconomic insights to guide investment strategy, chairs the Employment Equity Forum, and regularly comments on economic issues in the media, including as a columnist for the Financial Mail.
Sanisha says: “What has been clear from the budget debacle is that all parties belonging to the GNU [Government of National Unity] are committed to fiscal responsibility and aim to maintain a prudent fiscal stance. The disagreement arose on how to get to that point (i.e. in the absence of higher growth, would the government need to raise taxes, cut expenditure or extend borrowing).
“Given that the growth outlook has deteriorated markedly since Budget 1.0, the revenue gap that has to be plugged is significantly higher than the R13.5-billion expected to be collected from a 0.5 percentage point hike in the VAT rate.
“This means that some of the provisional allocations (eg hiring more frontline workers) are likely to be pared back, or we might see an upward adjustment to the revenue buoyancy estimate or there may be a higher borrowing requirement (which will not necessarily translate into an increase in government issuance but could come from the government’s cash balances). In reality, it is likely to be a combination of all of the above.
“We think cutting back on SETAs [Sector Education and Training Authority], VIP protection services or spending reviews will take time and are unlikely to come about in Budget 3.0.”
