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<\/a><\/p>\nPotential slippage on the government wage bill, a larger and more permanent form of basic income support and additional bailouts to fragile state-owned companies remain key risks to fiscal consolidation and debt stabilization in the medium to longer-term, Momentum Investments analyst Sanisha Packirisamy said in a note.<\/p>\n
What Bloomberg Economics Says…<\/strong><\/p>\n “Better-than-expected revenue collections will again improve South Africa\u2019s fiscal metrics when Finance Minister Enoch Godongwana tables the nation\u2019s budget. But the country is not out of the woods – a debt crisis looms if the government opts to raise spending with no credible strategy to boost the pace of growth,” said Boingotlo Gasealahwe, Africa Economist.<\/p>\n Of 16 economists in a Bloomberg survey, 81% think President Cyril Ramaphosa\u2019s latest extension of a monthly grant for the jobless, first introduced in response to the pandemic, will become permanent.<\/p>\n Almost two-thirds of survey participants see the country introducing a basic income grant before national elections in 2024.<\/p>\n Tax Measures<\/strong><\/p>\n A permanent expansion of the welfare net means the government will have to consider more borrowing and raising taxes or postponing plans to lower the corporate tax rate.<\/p>\n That could further erode the tax base in a country where personal income levies, paid by about 7 million people, contribute 40% of total tax revenue. It would also weigh on economic growth which will probably won\u2019t top 2% for the next two years, according to a separate Bloomberg survey.<\/p>\n Ten out of fifteen economists don\u2019t see Godongwana following through on his predecessor Tito Mboweni\u2019s plan to lower the corporate tax by one percentage point to 27% from April.<\/p>\n Firms including PwC and ENSafrica said in their predictions last week the minister might only make the announcement of a lower company tax rate in the 2023 budget because the introduction of steps to broaden the tax base were delayed to allow the economy time to recover from the impact of the pandemic.<\/p>\n Wage Bill<\/strong><\/p>\n Failure to clinch a new three-year pay deal with labor groups that represent about 1.3 million civil servants could also add to spending pressures.<\/p>\n Talks that could run until March next year mean the National Treasury will have to continue paying state workers cash gratuities that could cost more than its R20.5 billion ($1.4 billion) annual estimate, according to survey participants.<\/p>\n The Treasury won\u2019t pencil additional costs into the budget so as not to \u201cfront-run\u201d the wage negotiations, Sisamkele Kobus, a fixed income analyst at Ninety One, said in a note.<\/p>\n A spending slippage of at least R184 billion, about two-thirds of which will be for welfare payments and the remainder for public-sector pay, is likely over the next three years, she said.<\/p>\n The expected improvement in the country\u2019s medium-term debt profile could also be derailed if the state decides to take over part or all of Eskom\u2019s R392 billion of debt.<\/p>\n