2019 budget speech predictions

Finance minister Tito Mboweni will deliver the 2019 Budget on 20 February, and Gavin Smith, head of Africa at deVere Acuma, believes that the budget will prioritise political realities over fiscal discipline.

“A pickup in economic growth since summer 2018 should have supported tax revenues, but doubts over the growth spurt’s sustainability, and continuing weak tax collection, both persists,” he said.

“Finance minister Mboweni’s October prediction of a 2018/19 budget deficit of around 4% may be increased,” said Smith.

Given power shortages, the upturn in industrial production seen last year may struggle to continue. The World Bank’s most recent estimate for GDP growth is 1.3% this year, down from a June 2018 estimate of 1.8%.

As well as unreliable energy supplies, it cited fiscal consolidation, a slowdown in household credit growth and high unemployment with low productivity growth, as the main reasons for the downgrading of its 2019 GDP growth estimate, he said.

Ahead of a general election in May, further state funding for debt-ridden Eskom is likely in February’s budget even if it fails to agree with a credible government turn-round plan.

The government does not want erratic electricity supplies to worsen further, particularly as voters head to the polls. Political sensitivities are also likely to delay the sale of South African Airways.

“One hopes that finance minister Tito Mboweni will try to cease the flow of state funds to these leviathans as soon as possible after the elections,” Smith said.

“The much needed reform of state operated enterprises (SOEs) across the economy must be done hand-in-hand with labour market reform, and removing oligopolies in areas such as retail.

“The government is to be commended for its investigation into state capture under Zuma. Tackling corruption within the SOEs will be key to increasing their productivity and decreasing their dependence on tax payers’ funding,” he said.

The country’s twin government budget and current account deficits, together with a weak economy, makes the rand susceptible to weakness, he said.

However, market expectations for fewer interest rate hikes from the Fed than previously expected in 2019, has helped support the rand.


President Cyril Ramaphosa will deliver his second state of the nation address (SONA) on Thursday at 19h00 in Cape Town.

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, said in a note on Thursday (7 February), the rand is under pressure after weakening even further during the overnight session, bringing many of the South African issues back into focus as we await president Ramaphosa’s address.

Market participants will keep a close eye on the president’s statement, looking for solutions relating to Eskom and youth employment in particular. Disruptions by opposition parties are a possibility again, with the EFF already having issued a threat to do so.

“Wednesday’s State of the Union address by Donald Trump was largely ignored by market participants as no concrete commitments were made, which saw the dollar rally to its strongest levels in two weeks, adding to the rand woes,” Botes said.

The rand traded at the following levels against the major currencies:

  • Dollar/Rand: R13.58  (0.28%)
  • Pound/Rand: R17.53  (0.17%)
  • Euro/Rand: R15.42  (0.21%)

Read: South Africa wants to spend billions on Africa’s energy megaprojects as Eskom struggles back home

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2019 budget speech predictions