Key takeaways

The Minister of Finance divided the windfall revenue receipts of F21/22 between deficit reduction and spending priorities. This meets our criteria of our Budget Preview titled “Spending the windfall wisely”.

Key issues we were watching were mostly in line with our expectations:

Risks to the MTEF forecast

• A slower growth recovery as National Treasury’s GDP forecasts factors in firmer commodity prices and Chinese growth, which supports its tax buoyancy and revenue projection.
• Limited progress has been made on SOE reforms although SONA noted that some of the SOE’s could be disposed of.
• The public sector wage bill with the gratuity bonus of R20.4bn carried over into F22/23 with wage negotiations starting in March 2022. In our view, the  latter should form part of President Ramaphosa’s 100 day target to reach a comprehensive social compact, focused on strengthening the ERRP which requires tradeoffs between stakeholders in the economy.

Bond market outlook

We view the Budget Review 2022 as neutral for the country risk premium and the rand.

ICIB’s expectations vs February 2022 Budget Review projections