#MTBPS2020: A tightrope walk for Finmin Mboweni

South Africa's medium-term budget is set to be a defining moment for the country's economy, with Finance Minister Tito Mboweni facing a tightrope walk between steering the nation out of an economic slump or sending it on a path towards financial crisis. The expectations and wish list for the budget were unpacked by Annabel Bishop, Chief Economist at Investec, and Herman van Papendorp, Head of Investment Research & Asset Allocation at Momentum Investments, in a recent interview on CNBC Africa. The key theme of the discussion centered around the challenging economic landscape facing South Africa, with significant emphasis placed on key areas such as growth numbers, debt metrics, state-owned enterprises (SOEs), and the impact of stubborn unions. Annabel Bishop highlighted the grim economic outlook, projecting a contraction of about 8.9% for the year, leading to elevated debt levels and fiscal deficits. She expressed concerns about the declining investor appetite for South African bonds and the potential for credit rating downgrades. The discussion also delved into the critical need to differentiate between essential and non-essential SOEs, emphasizing the importance of targeted budget cuts and reallocation of resources. Additionally, the impact of public sector wage cuts on government expenditure and investor confidence was highlighted, with a focus on striking a balance between fiscal prudence and stimulating economic growth. Herman van Papendorp echoed the sentiment that Minister Mboweni faces a challenging task of balancing fiscal consolidation with long-term growth objectives. The need to make tough decisions on public sector wages and expenditure was emphasized as crucial for restoring economic stability and investor confidence. One of the key points raised during the interview was the significance of maintaining the minister's credibility and implementing effective measures to address the current economic challenges. Annabel Bishop stressed the importance of revenue generation and efficiency improvements at institutions like SARS to support sustainable economic growth. The discussion also touched upon the potential market reactions to the budget announcement, with concerns about market-friendly policies and the need for careful decision-making to avoid negative outcomes. The focus on financing economic recovery while avoiding unsustainable debt levels was emphasized as a critical aspect of the budget presentation. In conclusion, the interview provided a comprehensive overview of the challenges and prospects facing South Africa's economy, highlighting the need for decisive action, strategic budget allocations, and a balance between fiscal discipline and growth stimulation. Minister Mboweni's budget presentation was viewed as a pivotal moment in determining the country's economic trajectory and relationship with global investors.