MTBPS: Winter is Over

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18 November 2019
In 2018, the University of Nebraska-Lincoln conducted research to find out if it was easier to be a pessimist or optimist. The research concluded that a negative response is faster and easier than a positive one and this is probably confirmed by the general response to the Medium Term Budget Policy Statement (MTBPS) presented by Finance Minister Tito Mboweni recently. 

Mboweni told South Africans: “Here we stand at the end of winter. The food cupboards are almost bare. We have been shuffling about in old and uncomfortable brown shoes. Our expenditure continues to exceed our revenue. Our national debt is increasing at an unsustainable pace. The economy is not performing well.”

Opposition parties, economists and financial media clamoured to point out things like:  

  • The South African Debt to GDP ratio is currently on track to reach 70% in the next year or two and hit 80% by 2027.
  • South Africa spends nearly R300bn per year servicing interest on debt – more than is spent on the health budget annually
  • A R53bn shortfall in the collection of tax from SARS
  • There is not the political will to tackle Labour unions and the Eskom debt problem 

All of these are significant issues facing the South African economy and there is no question that there are some hard discussions to be held by government, labour and the private sector.

As an ordinary South African, when statistics like the above are bandied about, it is easy to become demotivated around the prospects for the country. However if we take into consideration some tough talk from Minister Mboweni around cutting perks for public officials, there are 3 developments from which we can draw some optimism:  

  1. The National Prosecuting Authority (R1.3bn) and SA Revenue Services (R1bn) have both received additional funding allocated to them to strengthen their capabilities

  2. SARS announced the reopening of the Large Business Centre

  3. The strategy of breaking up Eskom has gathered some momentum  

Strengthening the NPA and SARS

These are two of the most critical institutions in South Africa. Foreign investors want to see a strong message that we have zero tolerance for corruption. If we can re-capacitate these key institutions and see action, it could result in improved confidence. This in turn could drive foreign investment and improving investment grade ratings. 

The Large Business Centre

Corporate Income Tax is the third largest contributor to the fiscus and it is no secret that voluntary compliance amongst large corporates, multinationals operating and high net-worth individuals in South Africa leaves something to be desired. The re-establishment of the Large Business Centre could be a critical driver of revenue. 


The power utility is the single biggest threat to the South African sovereign outlook and one of the key opportunities to de-risk Eskom is to break it into three separate operating units: Transmission, Generation and Distribution.

Representatives from National Treasury and Public Enterprises have indicated that the Transmission unit could be separated between January 2020 and March 2020.

“Eskom is a business and must be run that way ... once I am convinced that the Eskom board and management has made an irrevocable commitment to implement government’s decisions and there is enough progress, we will negotiate the appropriate size of debt relief,” Mboweni said in his speech to parliament.

Shining the sun on SA (Pty) Ltd

Minister Mboweni has indicated that Winter has passed. If we think of South Africa as a business, our finance and governance controls are being strengthened and we are sending positive messages to investors.

If you are confident about investing in SA (Pty) Ltd then let’s get started on your investment journey.


Marc Ashton
OUTvest is an authorised FSP.  All investments are exposed to risk, dependant on the performance of the underlying investments and not guaranteed.  Past performance is not indicative of future performance.
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