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Finance Minister Enoch Godongwana is set to deliver the Medium-Term Budget Policy Statement (MTBPS), or “Mini Budget” on Wednesday, to outline the adjusted estimates of government expenditure.

The Mini Budget provides an opportunity for Parliament to assess how government intends to balance economic growth, service delivery and fiscal sustainability amid competing demands on the public purse.

It also establishes government’s economic policy framework, updates economic forecasts, adjusts departmental budgets and authorises emergency spending.

This year, Godongwa is up against balancing the country’s needs with the demands of a more challenging macroeconomic environment compared to February, when he presented his Budget Speech.

Encouragingly, the domestic economy has been resilient despite pockets of weakness in manufacturing and mining, and higher inflation, with gross tax revenue rising in line with Budget Statement forecasts, writes Nedbank senior economist Isaac Matshego in article for SABC News.

However, he points out, sharp increases in fuel prices and global supply chain disruptions emanating from the Middle East conflict, pose risks to continued strong growth in the major tax collections.

Smaller opposition parties want the Finance Minister to use an expected tax windfall to reduce living costs, starting with the price of fuel.

In conversation with Stephen Grootes, Matshego notes that the 7.9% growth in tax revenue in the first five months of the fiscal year, from April to August, was driven primarily by higher corporate taxes.

What they are concerned about, he says, is the trend in personal income tax, which is likely to come under pressure in the second half.

Then there is the burning question of fuel levies, which he says were down by 46% due to the earlier cut implemented by government to ease the pressure on consumers.

“So, I would not be too excited about these numbers if I was the Finance Minister because the second half of the year is still ahead of us and we’re seeing slowdowns in some key sectors, particularly mining and also manufacturing.”

As Matshego puts it, we must remember that govenment is also a consumer and is facing higher inflation pressure right now.

He notes that around R18 billion in revenue was sacrificed with the fuel levy reduction if this year’s numbers are compared to the first five months of the previous fiscal year.

As a result, Godongwana will have to balance more fuel levy relief against the expected outrun in corporate taxes.

“The question basically is, will the overshoot in corporate taxes really compensate for the loss of taxes by reducing the fuel levy?”

“We’re just worried about the overall numbers – in February, we were encouraged by National Treasury showing us that it remains committed to reducing the budget deficit. And we’re going to reach that 3% benchmark number in about three years’ time. Growth of debt also being contained. So it’s all about that balance because we don’t know how long this fuel price shock is going to last.”

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