Economy

2021 Medium-Term Budget Policy Statement: initial reaction

Fiscal consolidation a positive but expenditure risks remain

The South African investment community breathed a collective sigh of relief this afternoon, as Finance Minister Enoch Godongwana delivered a positive 2021 Medium Term Budget Policy Statement (MTBPS) that placed an emphasis on strong fiscal consolidation.

MTBPS commentary

Finance minister Enoch Godongwana’s maiden Medium Term Budget Policy Statement (MTBPS) was broadly in line with expectations, judging by the muted reaction from the bond and currency markets. Not too dissimilar from his predecessor, ex-Finance Minister Tito Mboweni, the budget address was an attempt to find a balance between continued fiscal consolidation, while paving a way for improved economic growth.

Markets confirm a positive reaction to Godongwana’s first major speech

Finance Minister Enoch Godongwana’s first significant speech since his appointment in August 2021 saw a minimal reaction from the equity market. Good news had been expected from the Medium-Term Budget Policy Statement (MTBPS) and the market signalled its satisfaction that there were no negative surprises, such as alluding to tax rate increases.