All eyes on #Budget2016
Johannesburg - As Finance Minister Pravin Gordhan gears up for what will arguably be his toughest budget speech yet, interest in what he will say is ramping up on social media.
Between Friday and Sunday, the volume of conversation on the budget has grown “substantially,” says youKnow MD Kelvin Jonck.
Jonck says the fact that the number of conversations on Sunday grew so radically when weekends are typically low volume, shows the conversation is moving into its growth phase.
The conversation, he adds, gained ground after news emerged that Gordhan was no longer limiting media involvement to the post budget breakfast to the Gupta-owned New Age, he says.
Yet, notes Jonck, across the conversation, the sentiment is more negative than positive with the biggest recent shift being in the decrease in the number of positive conversations regarding the budget ,down 19 percent.
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Looking at the interest of the individuals contributing to the conversation since the State of the Nation Address, there is a strong bias towards interests in financial markets, accounting, finance and economics, says Jonck.
Gordhan’s speech is widely expected to deal with issues such as a dwindling tax base and sluggish economic growth, with SA now predicted to dance on the edge of - if not enter - a recession this year.
Eric Enslin, CEO of FNB Private Wealth and RMB Private Bank says the speech should prioritise concrete interventions to avert further economic deterioration and improve investment prospects. Currently SA is a notch above junk status and the risk of a downgrade looms large.
“Under the watchful eye of ratings agencies, SA is under pressure to improve its current economic position and investment climate. We’ve already heard in the State of the Nation Address that the economy is at the centre of our government’s agenda. This message is consistent with what the South African delegation said at WEF in Davos.
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“Hopefully, this will be fleshed out even further during the upcoming budget announcement - through concrete plans to reassure local and foreign investors that South Africa is still a destination worthy of their investment. Of course there are factors which are beyond SA’s control but we need to urgently address those within our control.”
Enslin points out South Africa’s current economic fortunes have been partly impacted by the poorly performing Chinese economy and stronger dollar. Poor gross domestic growth, drought, rising inflation and weak rand have also eroded the country’s position. Yet, he says, South African investors are traditionally optimistic about the country’s prospects - demonstrated through their preference to invest locally as opposed to going to other destinations.
“Over the years, South African investors predominantly favoured investing locally - a trend that is slightly different when compared to foreign investors who prefer markets outside of their domicile country. This certainly counts in our favour as a country but we need to incentive the confidence of local investors by enabling better returns.”
Adding its voice to the debate is the South African Institute of Professional Accountants (SAIPA), which is calling on Gordhan to focus the budget on mid- and long-term economic growth, even while dealing with short-term issues.
“Minister Gordhan has promised that the budget will inspire confidence even though the country has some tough decisions to make. This will only happen if the minister maintains focus on the medium and long term in order to set the scene for economic growth,” says Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committees at SAIPA. “The pain we will certainly have to take will only be bearable if the taxpaying public is confident that its money is being wisely spent, and that the foundations for long-term prosperity are being laid.”
Lesiba Mothata, chief economist at Investment Solutions, adds it is heartening that the National Treasury is working tirelessly to avoid South Africa's credit rating being lowered to junk.