By Shaun Benton tel: (021) 465-3658
 
Cape Town – Finance Minister, Trevor Manuel, today presents to Parliament the Medium Term Budget Policy Statement (MTBPS), updating government’s economic, social and development policy priorities for the next three years.

In his MTBPS last year, Mr Manuel expressed concern at the strength of the rand and the way this could affect South Africa’s mines and its exporters. He did, however, say that “while there are adjustment problems for industry at R6 to the dollar, there would also be growth-inhibiting stresses at R10 to the dollar, particularly with oil prices at current levels”.

If anything major has changed since last year it is the oil price, which, at around US$59 a barrel is even higher than the already worrisome US$54 at this time last year.

Last week, Reserve Bank Governor, Tito Mboweni, was in parliament lamenting the “consistent, stubborn” increases in the price of oil and warning that this was placing inflationary pressures on the global economy, including South Africa.

At the same time, a Reserve Bank official present in parliament with Mr Mboweni said government revenue was “exceptionally strong” and that tax collection in South Africa was “way above budget”.

Economists are reportedly predicting that the finance minister may today cut his budget deficit forecast on the strength of this bigger slice of revenue, surging consumer spending and a weakening rand.

Some are hoping he will cut company tax on the strength of current government revenues, and announce an increase in spending on infrastructure, which he said he would do in February this year.

Mr Manuel has also expressed concern about South Africans becoming dependent on welfare handouts which have led pundits to argue he will push for greater infrastructure spending in a push to create higher employment.

This however, is hampered by a skills shortage. And there has been some under spending by the provinces.

Where most economists appear in agreement is that the government – as also stated by a Treasury team presenting a review of provincial expenditure last month - currently has the benefit of exercising a number of different options because of its current strong financial position.

Exactly which options these will be, will become clear after Mr Manuel expresses government’s intentions with the release of his budget policy statement later this afternoon. – BuaNews