Economist Lesiba Mothata's 2017 budget expectations

South Africa's Finance Minister, Pravin Gordhan, is set to deliver his budget speech on 22 February. This speech comes ahead of ratings updates from Moody's on 7 April and S&P on 2 June. Expectations are high as the country grapples with economic challenges. Lesiba Mothata, Chief Economist at Investment Solutions, shared insights on the upcoming budget. One key theme is the focus on taxes. It is anticipated that high-income earners may face a new tax bracket with higher rates. Wealth-related taxes such as duties and capital gains tax are also expected to increase. The aim is to address income inequality and boost government revenue. While VAT may remain unchanged, any increase could impact inflation negatively, affecting consumer spending. Despite this, recent data shows signs of economic improvement. The World Bank report suggests that South Africa has reached the bottom of its business cycle in 2016 and is entering a period of cyclical recovery. Positive sentiment in manufacturing and growing household expenditure indicate a potential turnaround. Mothata also discussed political pressure on the finance minister. Internal cabinet conflicts and the need to fund new initiatives like 'Fees Must Fall' pose challenges. However, there are sources of potential revenue, such as stable corporate taxes and voluntary declaration of offshore investments. These factors could help the minister strike a balance in the budget, supporting economic growth. The upcoming budget will be crucial in navigating South Africa's economic path amidst internal and external pressures.