The one politician markets hope will stick around after the 2024 elections

 ·1 Mar 2024

With question marks floating over the outcome of the 2024 national election, Bank of America says it hopes that Finance Minister Enoch Godongwana will retain his position when the new government is sworn in.

Recent polls have the ANC dropping below 50% for the 2024 election, which will force the party into a coalition government.

However, with no one being able to predict the future, Bank of America warned that the outcome could be uncertain and noisy.

Despite the ANC’s potential need to boost votes, the 2024 Budget that was presented by Godongwana last week looked beyond elections pushed aside suggestions of populist spending before voting.

Whether an electioneering ploy or not, the minister announced no new spending ahead of the election and significant tax increases, with the aim of stabilising debt.

“We hope that, for continuity, the Finance Minister can stay beyond 2024 to continue implementing his fiscal framework,” Bank of America said.

“Leadership changes could be a further setback to structurally weak public finances.”

In terms of the medium-term fiscal strategy, the Minister and Treasury’s aim will be to achieve fiscal sustainability through primary surpluses and debt stabilisation.

The debt-stabilising primary surplus is likely to be around 1% of GDP, Bank of America said.

They will also try to support economic growth, with a particular focus on energy and logistics.

Eskom’s debt-relief arrangement will end in 2025/26, with widespread new private energy generation projects expected to come online. The country has already boosted in its private solar generation to over 5,000MW over the last year.

Transnet has also received a R47 billion guarantee in 2023/24 from Treasury, conditional on the implementation of its comprehensive turnaround plan.

During the Budget, Godongwana also announced that third parties will be able to access Transnet’s rail network by May of this year.

However, Bank of America noted that several of Treasury’s spending assumptions are at risk, which could impact fiscal outcomes.

“Historical wage agreements have resulted in settlements above the Treasury’s baseline,” the bank said.

“Interest spending has grown by 15% over the past three fiscal years. Assuming an increase of less than 10% could be a risk, even if helped by reducing borrowings through central bank profits drawdowns.”

“New spending transfers to Transnet may be delayed rather than denied, as Transnet is too big to fail.”

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