Skip to content Mboweni Takes Centre Stage
Commentary: 29 October 2018
Former Goldman Sachs chief economist (and the man who coined the term “BRIC”), Jim O’Neill has given our new Finance Minister, Tito Mbweni the thumbs up. He believes the appointment will go a long way towards restoring SA’s international credibility as an investment destination. O’Neill knows Mboweni personally and has said that President Ramaphosa’s decision to appoint Mboweni to the role is a sign that he is “trying to put in place a much-needed improved framework for policy.”
After months of speculation SA’s much-anticipated medium-term budget policy statement was delivered last Wednesday. Mboweni sounded all the right notes but the reality is that our fiscal space is narrowing. The extent of slippage is starkly reflected in the debt-to-GDP ratio, which is expected to nudge uncomfortably close to 60% by 2023/24 from an estimated 55.8% in the current year. Mboweni’s honesty though was welcome: he appears resolute in maintaining fiscal discipline and has said that SA must act swiftly to bring down its debt levels to avoid turning to the IMF for assistance.
Annual inflation remained unchanged at 4.9% in September. Food prices rose by 0.3% month-on-month, with the 0.6% contraction in meat inflation being offset by increases in prices for bread, cereals and dairy. The unchanged reading might temper the Reserve Bank’s hawkish stance somewhat, and may persuade the monetary policy committee to leave interest rates unchanged at their meeting next month. At 5.2%, the Bank’s third quarter inflation forecast is slightly above the actual rate of 5%.
The National Electricity Regulator of SA (Nersa) has released two tariff applications from Eskom for public comment: Eskom’s revenue requirement is close to R100bn over the next three years, which translates into a 15% per annum tariff hike for consumers. Nersa will announce its final decision on the 1st March, but it is highly unlikely that the full 15% will be approved.
President Ramaphosa’s investment summit last week culminated in 21 companies committing themselves to investments totalling over R200bn across a diverse range of sectors. To date, pledges of R400bn have also been made and a booklet of potential investment opportunities and projects has been published. The summit reinforced the importance of public-private partnerships in stimulating growth and employment opportunities, with Rampahosa at pains to stress that the government was ready to “embrace a future of cooperation and partnership.”
By Bridget Kelly, Santam
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