“There’s really no doubt that this year’s budget will contain a lot of bad news — the only real question is how bad,” said John Ashbourne, an economist at Capital Economics Ltd. “Mboweni will prioritize holding to the deficit target, but this will require painful cuts. There isn’t, frankly, a lot of money available.”
President Cyril Ramaphosa’s recovery plan calls for spending to be rejigged to fund projects that can spur growth and cut into the country’s unemployment rate of 27%, near a 15-year high. This comes after Africa’s most-industrialized economy slipped into its first recession in a decade and S& P Global Ratings and Fitch Ratings Ltd. cut the nation’s debt to junk last year.
Moody’s Investors Service warned this month it could follow suit if South Africa doesn’t stabilize debt.
Ramaphosa replaced Jacob Zuma as president in February, vowing to stimulate growth and attract investment, fix state companies and root out corruption. The budget comes a day before the start of a three-day investment summit to help lure $100 billion into the economy, with investors seeking evidence finances are under control.