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SA has first quarterly primary surplus in three years

A sign that the National Treasury’s efforts to bring spending in line with revenue are succeeding.
Image: Waldo Swiegers/Bloomberg

South Africa recorded its first quarterly primary budget surplus since 2018 in the three months through June, a sign that the National Treasury’s efforts to bring spending in line with revenue are succeeding.

The government’s primary balance swung to a surplus of R9.8 billion, or 0.6% of gross domestic product, in the first quarter of the 2022 fiscal year, compared with a deficit of 2.2% of GDP in the previous three months, according to the South African Reserve Bank’s Quarterly Bulletin published on Tuesday. A primary surplus, which excludes interest costs, suggests the state can extract resources from the economy necessary to service debt.

The Treasury this year shifted focus to make a primary budget surplus its most critical fiscal anchor, instead of a spending ceiling.

In February, the Treasury projected a primary surplus of 0.1% of GDP in 2024-25, targeted a positive balance of 0.3% of GDP in the long run and saw debt stabilising at 88.9% of GDP in 2026 fiscal year. The medium-term budget scheduled for November 4 is likely to show an improvement in these metrics, after changes to the way GDP is calculated showed the economy is bigger than previously estimated and with tax revenue overshooting estimates because of a windfall in mining profits.

The government is “on track” to achieve a primary surplus by the middle of the decade, Edgar Sishi, acting head of the Treasury’s budget office, said last week at a tax conference.

While the latest data reflects an improvement in economic activity from the height of restrictions to curb the coronavirus pandemic, South Africa remains stuck in its longest downward cycle since World War II.

Weakening cycle

The economy entered the 94th month of a weakening cycle in September, according to official data. However, it’s possible South Africa has already entered an upward cycle given the strong recovery in output from 2020, when the economy contracted the most in at least 27 years, the central bank said in an emailed response to questions.

The central bank monitors more than 300 indicators representing economic processes such as production, sales, employment and prices to determine the direction of the trend and is partially waiting for revised data to identify a turning point, it said. The last major declining cycle in the economy lasted 51 months between 1989 and 1993, when the former all-White government renewed a state of emergency and the country prepared for its first democratic elections.

Other key points:

  • Gross loan debt for the first quarter of the current fiscal year was 68.8% of GDP. That compares with the Treasury’s February budget estimate of 80.3% of GDP in the previous year and 81.9% for the current fiscal year.
  • There were foreign direct investment inflows of 17.4 billion rand in the three months through June, compared with inflows of R6.1 billion in the previous quarter.
  • Portfolio investment inflows of R4.9 billion were recorded, compared with outflows of R6.4 billion in the first quarter.
© 2021 Bloomberg

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Waiting for someone to leave a cANCer comment…

Well done to the treasury team for a job well done, under very trying times and circumstances.

Another success for BEE. Critics will try to minimize this stellar performance, but the numbers speak for themselves.

What has this got to do with BEE?

Go away Julius. Get your head out of your ass.

Exactly comrade, just look at how this positive quarter dwarves the others in the chart! And its not as if over the last decade since 2009 we had a government who disregarded all fiscal responsibility and spent like there was no tomorrow which in effect made any somewhat fiscal responsible quarter be the “best” in a while.

I mean its not as if we ran surpluses for the majority of the early to mid 2000s. This is indeed another success for BEE, I mean this is definitely the best quarterly performance fiscally in the history of the Republic, Union and the Colonies and Boer Republics for that matter. Race was indeed the deciding factor in this result, God forbid that we judge people on the content of their character and not on the colour of their skin!

This fish does’t take the hook! Bot. In fact the general profile, intelligence, and class of the commentators here is above your level. Go away, you are on the wrong site. We are onto you. Fool

@EFF. Only until the Finance Minister’s next Feb 2022 Budget Speech arrives….then it’s back to doom and gloom, and such “stellar performance”” is conveniently forgotten.

You can not compare Q1 2021 over Q1 2020. For goodness sake.

The surplus was all due to a windfall by the mining companies from sky-high commodity prices. It was pure luck and had NOTHING to do with treasury efforts or BEE. The author of this article is deluded and clearly in the pockets of the politicians.

Please don’t confuse our EFF comrade with facts ;

End of comments.

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