Finance Minister Tito Mboweni is expected to shed light on the funding of struggling state-owned enterprises, projections for the country's debt and economic growth estimates at this year's mini budget, according to Investec economist Lara Hodes.
Mboweni will deliver the medium-term budget policy statement, or mini budget, on Wednesday October 30 at 14:00. It will be an opportunity for the him to provide updates on the progress of the announcements he made in the main national budget in February, said Hodes.
In an environment of weak economic growth and a "high level" of uncertainty, revisions to the country's fiscal deficit and GDP are anticipated, she said. In February Treasury revised SA's economic growth for 2019 down from 1.7% to 1.5%. The SA Reserve Bank has since lowered its growth projection to just 0.6%, which is lower than 2018.
And while Treasury projected that SA's budget deficit would reach 4.5% this year, this may widen to 6%, Hodes warned, due to poor revenue collections and increasing expenditure.
"Underpinning the deterioration is worse than anticipated revenue accumulation for the fiscal year, coupled with expenditure overshooting previous estimates and softer GDP growth than forecast," she said.
The February budget emphasised the need to boost economic growth through strengthening private sector investment, improving the planning and implementation of infrastructure projects and rebuilding state institutions.
In terms of economic reforms, Treasury's economic discussion paper - which, according to Mboweni, will be finalised soon – is expected to be released together with the mini budget, Hodes noted.
The economic policy document was released by Treasury in August, and puts forward a number of reforms to boost economic growth and create jobs.
Treasury has held three economic conferences over the past year to inform the ideas and discussions on the paper, Mboweni told the National Assembly on Wednesday. There have been over 800 public submissions on the document. Proposals which are "internally consistent" with policy may be incorporated, said the finance minister.
Hodes said the fiscal space for further policy stimulus has been eroded. "As such, a significant and sustainable lift in economic growth is largely reliant on the effective execution of structural reforms and the enhancement of policy certainty," she said.
"Business and investor confidence would improve as a result, driving a private investment led increase in economic growth."
According to Hodes the mini budget will also give clarity on Eskom's debt position, which has risen to about R450bn.
In the February budget, Mboweni said R69bn in funding would be made available to Eskom over three years to support its restructuring. The National Assembly also recently passed a special appropriations bill that would see Eskom receive a R59bn cash injection over two years to help pay interest on its debt The bill is now with the National Council of Provinces for consideration.
Ratings agency Moody's viewed the R59bn cash injection as credit negative. Hodes said that Moody's would likely downgrade SA's credit outlook from stable to negative within the next 12 months. Moody's is the only ratings agency to still assess SA's sovereign credit rating at investment grade. It is expected to review the credit rating in November.
"This negative outlook on SA’s Baa3 rating would mean SA has up to two years to repair its government finances in order to avoid a downgrade into the sub-investment grade category of Ba1 and below," Hodes said.