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SA Budget Speech 2023
Finance minister Enoch Godongwana announced his Budget speech in Parliament on Wednesday. On balance, while macroeconomic risks persist, the 2023 Budget was in line with market expectations, reiterating government’s commitment to stabilising debt.
4 Things You Should Know:
1 | Economic Growth
Economic growth is expected to slow in 2023. Government forecasts that power failures, a weaker performance amongst the world’s largest economies and persistently higher inflation will reduce South Africa’s GDP growth from 2.5% in 2022 to 0.9% in 2023. Thereafter, government expects economic growth of 1.5% in 2024 and 1.8% in 2025.
2 | Eskom and SOEs
The South African government announced that it will take over R254bn of Eskom debt over the next three years. The utility’s current debt stands at an unsustainable R423bn.
Some of the actions that Eskom and the government are taking to alleviate the power crisis include:
Since the 2009 fiscal year, the government has provided the utility with R263.4bn in rescue funding. The latest injection will take that to R517.4bn. Yet, Eskom still had a record 207 days of load shedding in 2022 compared with 75 days in 2021. At the same time, between the 2012 and 2022 fiscal years, state-owned companies received about R267bn in bailouts from the government. Contingent liabilities arising from state-owned companies will have risen from R84.4bn in the 2009 fiscal year to R479bn by the end of the 2023 fiscal year.
3 | The Fiscus
Government’s fiscal consolidation measures have registered some progress in narrowing the budget deficit. Debt relief to Eskom will however increase the debt-to-GDP ratio. National Treasury government debt is now forecast to peak at around 73.6% of GDP, with the higher peak mainly owing to R254bn of relief for Eskom.
4 | Taxes
Government proposes tax relief totalling R13 billion in 2023/24 to support the clean energy transition, increase the electricity supply and limit the impact of consistently high fuel prices.
Investors will draw some comfort from the continuity of fiscal discipline and more clarity around the support for Eskom. Fiscal risks however remain. Investors will continue to be concerned about the downside risks to economic growth and the recent surge in loadshedding as well as the upside risks to spending on social grants, wages and SOE support.
The FATF grey-listing decision is expected at the end of this week. While some measures to help fend off the grey-listing (R1.3bn for the NPA, R265.3mn for FIC, 2 laws introduced which address 15 of the 20 legislative deficiencies identified by FATF) are encouraging, South African’s “should be prepared for this possibility”.
Carrick Wealth is an authorised South African financial services provider specialising in South African and international financial planning and integrated wealth management solutions. Licence Number FSCA45621. Company Registration Number: 2014/127048/07. The Carrick corporate group is also licensed in Zimbabwe, Botswana and Malawi, and holds three global licences in Mauritius. The information contained herein as well as the individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of Carrick or any financial product. This communication is intended to be used for information purposes only by its designated recipients and is not an offer, recommendation or solicitation to transact. While it is based on information freely available to the public and from sources believed to be credible and reliable, Carrick Wealth makes no representation that it is accurate or complete or that any returns indicated will be achieved. Investments in securities are generally medium to long term investments. The value of products may go down as well as up and past performance is not necessarily a guide to the future. Carrick Wealth (Pty) Ltd and its affiliates disclaims and assumes no liability for any loss or damage (direct, indirect or consequential) that may be suffered from using or relying on the information contained herein.
Week in Review: Fed Doesn’t Blink Despite Banking Turmoil
The most closely watched event of the week was the conclusion of the Federal Open Market Committee’s (FOMC) meeting on Wednesday. As expected, the FOMC raised interest rates by 0.25%
Week in Review: Banking Turmoil Rattles Markets
The failure of Silicon Valley Bank (SVB) last Friday set off a wave of investor fears that further collapses in banks would follow. Another large regional bank, New York’s Signature
Week in Review: China’s Post-Covid Recovery Shows Strong Progress
China’s National Bureau of Statistics (NBS) reported that the manufacturing purchasing managers’ index (PMI) rose to 52.6 in February from 50.1 in January, above the 50-point mark that separates expansion