On Wednesday, 21 February, South African Finance Minister, Malusi Gigaba delivered his first and possibly last budget speech as finance minister amid speculation that he will be let go once President Cyril Ramaphosa reshuffles his cabinet.
The 2018 budget has garnered mixed receptions from markets, civil society and opposition parties. This follows the President’s inspirational maiden State of the Nation Address last week. Business Confidence Index (BCI) rose to levels last seen in 2016. Since the ouster of former President Jacob Zuma, Ramaphosa has injected a new sense hope to South Africans and has attracted the attention of disillusioned ANC members.
The rand rose as much as 10c to the dollar as Gigaba presented the budget, while the JSE all share gained momentum after being flat at midday. Government bonds attained levels last seen in early 2015. The Rand reached R11.61/$, before softening to R11.65/$ on Wednesday night. The government’s benchmark R186 bond strengthened to 7.97% at one stage, before pulling back to 8%. The longer-dated R207 firmed to 6.63%, from Tuesday’s 6.745%, its best level since February 2015.
The speech was laden with familiar themes promising faster growth, tackling unemployment and providing services etc. Out of the long repertoire of government interventions highlighted in the address, the allocation of R57 billion of funding towards tertiary education over the medium term is probably the most expected promulgation following the nationwide violent protest by students since 2015 calling for free quality education.
At the same time, Treasury’s decision to increase Value Added Tax (VAT) by a percentage point and a further six to ten percent hike on sin taxes have predictably caused a row, as many analysts and market watchers argue that the taxpayer is already burdened with the high cost of living in South Africa, and a sluggish economy that is projected to continue on a low trajectory into the foreseeable future.
Itumeleng Makgetla
i.makgetla@politicalanalysis.co.za
