All eyes will be on Finance Minister Enoch Godongwana this afternoon when he delivers his maiden Budget Speech against the backdrop of record-high unemployment, an unprecedented high debt-to-GDP ratio, muted investments, and an already ailing economy that has been further constrained by the ongoing Covid-19 pandemic and the unrest in July last year.
His task in explaining how ever-increasing debt repayment costs are crowded by social spending is a politically unpopular one, but one which is expected to happen “because the President said so”. And it will require a fine balancing act as there is currently a pressing need for reform that promotes inclusion as a catalyst for returning economic agency to all South Africans.
The great tax expectation is for Godongwana to focus on stimulating economic growth and foreign direct investment by exercising restraint in increasing the pressure, especially on the corporate front, say the experts at ENSafrica in their list of 10 tax predictions for the budget.
In its list of four strategic priorities for the government to stimulate economic growth with the funds from a short-term boost from high commodity prices, agriculture federation Agri SA has proposed the minister cut hard-hit businesses some tax slack to enable their growth and encourage job creation.
There are many requests and expectations and the finance minister will never be able to please everyone, but a fairly boring budget in which he just slightly lowers the government’s fiscal consolidation predictions could prove to be quite positive for financial markets and credit rating agencies.
Not losing sight of Russia, US President Joe Biden has fired its first salvo in response to “the beginning of a Russian invasion of Ukraine” by sending additional US troops to the Baltics in a move to defend NATO countries, while slapping “comprehensive” sanctions on new issuances of sovereign debt, which means cutting Russia’s government off from Western financing.
Bloomberg reports instead of hitting Russia’s biggest banks as some investors had feared, the penalties target state-owned banks VEB.RF and Promsvyazbank, which the US said hold more than $80bn in assets and finance Russia’s defence sector and economic development. The US measures will freeze the banks’ US assets, ban Americans from doing business with them, cut them off from the global financial system and eliminate their access to the dollar, according to the wire service.
Biden also said Russia’s elites “share the corrupt gains of the Kremlin policies and should share in the pain”. The fortunes of Russia’s super-rich have already tumbled $32bn this year, with the escalating conflict in Ukraine poised to make that wealth destruction much larger.
Markets responded with a shrug, underwhelmed by the tit-for-tat approach. Bloomberg reports US equity futures and Asian shares rose this morning, suggesting investors also see the initial sanctions as limited. Demand for traditional havens like gold also eased. Brent crude, which came close to $100 per barrel a day earlier partly on worries about potential disruption to Russian supplies, was steady around $97 a barrel.
On the currency front, major units are holding fairly steady against the dollar, while emerging currencies are a touch firmer. “The rand opened at 15.04 this morning ahead of Godongwana’s maiden budget speech later today. Analysts are expecting a reasonably positive address and we could see the rand trade below the 15.00 level again,” comments TresauryONE. At last count the unit was already trading 0.37% firmer at R15.02/$.
Here’s a roundup of the world’s top and most interesting headlines:
SA Business
Shell-linked Batho Batho Trust donated R15m to ANC and Naspers R1m – News and MyBroadband
Billionaire Soon-Shiong’s firm lost 80% of its value in a year, but he has high hopes for SA plant – Bloomberg/Fin24
DStv to limit streaming and account-sharing from March – BusinessTech
Global Business
UK lost up to £16bn due to fraud and error in Covid loans schemes – The Guardian
This New York City internet cafe is asking customers for donations to pay its skyrocketing electricity bill – Business Insider
US women’s soccer reaches landmark $24m settlement in equal pay dispute – AFP
Markets
Most Asian markets rise after Russia sanctions but nerves on edge – AFP
Oil steadies as traders weigh US sanctions, Iran negotiations – Bloomberg
Gold down on a rise in Treasury yields after US and European sanctions on Russia – Investing.com
Opinion/In-depth
A just energy transition is both desirable and very necessary – but the costs for Africa are huge – Daily Maverick
‘Bleeding’ Road Accident Fund moves to gag audit release – Biznews
Ukraine: what’s really behind Putin’s deployment of ‘peacekeeping’ troops? Experts explain – The Conversation
Video
The Ukrainian paramilitaries ready to fight Russia – NYT News
Money 101: The impact of death-related costs and how to make the right decisions at the right time – Biznews TV
Stocks slide, oil jumps as Ukraine tensions flare – Reuters Video
Image: Enoch Godongwana (Brenton Geach, Gallo Images)
