Mazars executive on the new medium-term budget statement
Many aspects of the new Medium-Term Budget Policy Statement (MTBPS) recently launched by Finance Minister Tito Mboweni have caused concern, although the intentions of the minister are not all bad. This is according to Mike Teuchert, who is the National Head of Taxation at Mazars.
Mazars is not the first firm to express concern at the new budget statement. The biggest cause for worry amongst most market watchers is the considerable amount of debt that is reflected within South Africa, and the inability of the measures proposed to tackle this debt in the long run.
Lullu Krugel of Strategy& recently stated her concern that the rising debt levels, combined with the other economic conditions in South Africa are likely to drop the country below investment grade in Moody’s ratings. The credit rating agency is among the last to hold South Africa within the list of investment grade countries.
Given the country’s reliance on foreign investment for its future plans, losing investment grade on the Moody’s ratings would be a devastating blow to the country. Mike Teuchert at Mazars is also concerned about the debt, indicating that it appears to be spiraling out of control.
While the MTBPS has proposed measures to tackle national debt, it remains to be seen to what degree these can be implemented. “Proposed measures like the freezing of salaries for politicians, review of subsistence allowances for top-level government employees over the next few years and downgrading their flights to economy class is certainly sending the right message to the South African public,” said Teuchert.
“In addition, Mboweni has also highlighted that the growth in the public wage bill needs to be brought in line with inflation. Time will tell whether there is enough political will to implement these measures with the desired outcome,” he added.
Mazars has placed it faith in Tito Mboweni since soon after he was appointed Finance Minister last year. Judging from the medium term statement last year, Senior Tax Partner at Mazars Bernard Sacks described Mboweni as the CEO of South Africa, who must steer the country through a tough economic spell.
