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Goolam Ballim on what to expect from Gordhan this budget

‘I suspect that the minister is going to harden the signal about ceilings’ – chief economist, Standard Bank.

SIKI MGABADELI:  The finance minister is due to deliver the medium-term budget policy statement this coming Wednesday. It’s been a highly anticipated. The mini budget is not necessarily popular or all that interesting. It’s a lot of data-planning for the next three years. But so many events have got us here, such a lot of noise.

Let’s chat to Goolam Ballim, who is chief economist at Standard Bank. Goolam, thanks for your time today. In the midst of all this noise, what are you going to be listening out for on Wednesday?

GOOLAM BALLIM:  Siki, hello. This is critical. As we always say, from budget to budget, and whether it is the more substantial and laden-with-ceremony February narrative, or the medium-term rendition, both matter enormously.

So what’s special about this? Well, we know that it is in the wake of an enormous amount of political flux that has been unleashed since December and we will want to see whether the minister, in style and in substance, is able to show the promise of fiscal consolidation and use the levers at his disposal not to compromise South Africa’s fiscal standing any further.

Of course, the details will matter enormously. We know the budget is a three-year episode. He will present his prognosis and profile for key metrics over the next three years.

We think that in the 2016/2017 fiscal year there will be some slippage in the deficit, perhaps near 3% to 3.5%. But I suspect that the minister is going to harden the signal about ceilings, not just spending ceilings in terms of ratios, but I suspect he may even lean towards nominal spending ceilings to signal the level of conviction behind these attempts to not just stave off a ratings downgrade, but to arrest the perpetual and seeming unyielding rise in indebtedness.

SIKI MGABADELI:  So he’ll put in a harder stance there. What do you expect to hear from him on growth, because that’s where we get stuck a little bit? What room do the fiscal authorities have to actually stimulate this economy that is sleeping?

GOOLAM BALLIM:  The minister will reduce his growth forecast from that which was pencilled in in December or at least in February. And, of course, there is going to be no surprise in a sense that he’ll probably render a number closer to, say, 0.4% for 2016, and maybe near 1% in 2017, in line with consensus, in line with that other significant institution, the Reserve Bank.

From a growth stimulus point of view that’s particularly hard and I think many would argue that, while of course we want to see a budget that is growth-enhancing, that is encouraging of business risk-taking, based on South Africa’s mood, this hinges more proportionately on some resolution with regard to our political climate… [Line breaks down] And until there is some level of political resolution, that will be the forerunner for whether the private sector is going to commit to an economy where there is more likely to be a more becalmed political environment, and so encouraging of a spirit for risk-taking, irrespective of the budget suggested. The budget at the minimum is holding the bank, holding it from collapsing.

SIKI MGABADELI:  We are going to have to leave it there. That’s was the chief economist at Standard Bank, Goolam Ballim.

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