'Mboweni must remember revenue windfall means SA just in slightly smaller hole'

Tips for Tito: The Money Show interviews Ninety One's Nazmeera Moola ahead of the finance minister's Budget speech next week.

Finance Minister Tito Mboweni will present his annual Budget Speech next Wednesday, 24 February.

The key risks to the fiscus of a year ago, remain challenges the government is yet to overcome says Nazmeera Moola (Head of SA Investments at Ninety One).

These are the government wage bill and capital requirements of badly-run, inefficient state-owned enterprises (SOEs).

The good news, says Moola, is an unexpected revenue over-run on the back of South Africa's better-than-expected economic recovery.

Forecasters estimate this at between R35 billion and R150 billion, based on data from December.

However, government must guard against the temptation to view the revenue over-run as a windfall that can be spent to satisfy questionable demands, Moola cautions.

It is imperative that it holds the line on expenditure in the 2021 Budget and through the upcoming wage negotiations.
Nazmeera Moola, Head of SA Investments - Ninety One

Ray White interviews Moola on The Money Show.

We need to bear in mind that after Covid last year, the government came out and said they expected revenue to be down R300 billion compared to what they'd forecast in the February 2020 budget.
Nazmeera Moola, Head of SA Investments - Ninety One

What we're saying now is that revenues will be around R100 billion better than expected. That still leaves us down R200 billion from last year February.
Nazmeera Moola, Head of SA Investments - Ninety One

How does government play catch-up then?

The economy's already proven to be more robust than many expected, Moola notes.

The fact that commodity prices globally are doing well we've seen showing up in the mining revenues and volumes as well.
Nazmeera Moola, Head of SA Investments - Ninety One

The question is: How do we look forward and implement the structural reforms we've been talking about for years!
Nazmeera Moola, Head of SA Investments - Ninety One

Of course struggling SOEs continue to be a drain on the fiscus.

Government has to hold the line on expenditure she emphasizes.

Can government hold the line on transfers to the SOEs, but also the public sector wage increase?
Nazmeera Moola, Head of SA Investments - Ninety One

We need to use all this better-than-expected revenue to reduce debt levels, and that ensures long-term sustainability in South Africa.
Nazmeera Moola, Head of SA Investments - Ninety One

What would be helpful... is if the Treasury, after the Budget, said we're going to raise less debt every week. Currently, the government's issuing around R11.5 billion a week of debt!
Nazmeera Moola, Head of SA Investments - Ninety One

If we could take the R9 billion issued [before options etc.] down by R2 billion a week, that would prove government's commitment to control expenditure and it would be enormously positive to the bond market.
Nazmeera Moola, Head of SA Investments - Ninety One

Listen to Moola's analysis below: