Budget Speech and Beyond
Feeding off last month’s commentary, the overall outlook thus far in 2019 is a positive one. Markets have recovered ground since they ended negatively in December. We saw South African Minister of Finance, Tito Mboweni release the tax budget on Wednesday 20 Feb, 2019 for the fiscal year which garnered mixed reviews.
It was a tough budget with little relief for tax-payers as the country struggles with underperforming state-owned enterprises. We have dealt with the likes of Eskom and load shedding for some time and were therefore not surprised—rather, let down and made more anxious that not only will the average citizen pay more for sin-taxes while government departments remain bloated but, we will likely have to do it in the dark for some time still.
It has now been reported by the Sunday Times that looting within the organisation (Eskom) since 2005 could be as much as R500 Billion.
Post Budget Speech:
The rating agencies seem to have been appeased but wait to see what measures are effectively used to narrow the deficit in the short to medium term. The budget gap is forecast to reach its worst level in a decade in 2020. The forecast for GDP is at 1.5% and yes, Eskom will receive R69 Billion in bail out funds with the new budget over the next 3 years. There was however no increase on income tax.
Investors will certainly be aware of the upcoming National elections in May.
On the international front, the UK’s 2 year Brexit mandate to finalise the terms under which they split from the EU is drawing to a close and British PM, Theresa May is hard at work making sure a deal is in place come 29 March 2019. The major delay in reaching an agreement with the European Union lies in the border with Ireland. Although May has postponed the parliamentary vote until 12 March, it is hoped that in the next few days an agreement can be reached and shared with the public.
While these talks are making progress, the same can be said between China and the US. Talks and tensions between the two countries over cyber theft, intellectual property rights and other barriers to the trade talks seem to have been starting to lift. China is also assessing an agreement which would see them buying ten key commodities from the US.
Overall, there seems to be a positive move in the Global Markets in sentiment. Whether that is short lived or starts to have positive momentum on the markets remains to be seen.
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