PwC's expectations of mid-term budget

As South Africa's finance minister prepares to deliver his second medium-term budget policy statement on Wednesday, the expectations are high as the country faces a myriad of economic challenges. A note by the PwC firm has highlighted the major obstacles to accelerating South Africa's economic and employment growth, including power outages, a lack of skilled workers, and low private sector investment levels. Christie Viljoen, PwC Economist, joined CNBC Africa to discuss the key points to look out for in the upcoming budget statement. The global economic landscape has been significantly impacted by events such as the war between Russia and Ukraine, leading to rising inflation, interest rates, and slow economic growth. As a result, the South African government is expected to provide updates on revenue and expenditure forecasts, taking into account the current economic challenges. One crucial aspect to watch for is any news on plans to transfer some of Eskom's debt onto the government's balance sheet. While this move could make the public utility more financially sustainable, it would also lead to a significant increase in public debt and repayment costs. The issue of Eskom's debt has sparked discussions on how the government plans to service it. With potential options including tax increases or reprioritizing spending, ultimately, South Africans are likely to bear the burden of repaying the debt. As the country grapples with ongoing load shedding, finding a sustainable solution for Eskom's financial woes is imperative. Infrastructure development is another key focus area in the upcoming budget statement. Despite fiscal constraints, continued investment in infrastructure is crucial for long-term economic growth. The government's infrastructure fund aims to attract private sector investment, but there is a need for clarity on the progress of feasibility studies and the addition of new projects to the pipeline. Infrastructure spending is essential for driving economic development and creating job opportunities. On the revenue side, while value-added tax collections have been lower than expected, personal income tax and corporate tax revenues have overshot projections. The expected revenue overrun of around 50 billion Rand is a positive sign, which could be channeled towards reducing the deficit and funding critical areas like infrastructure repairs. However, challenges with the wage bill, which constitutes a significant portion of government spending, pose a hurdle due to high inflation and ongoing negotiations with labor unions. Overall, South Africa's medium-term budget policy statement is expected to address the country's economic challenges, provide clarity on debt management, infrastructure investment, and revenue projections. The finance minister's approach to balancing these competing priorities will be closely scrutinized to ensure fiscal sustainability and promote economic recovery.