Exchequer data – January 2023:  Not concerned about January’s outcome well below Bloomberg consensus

• The main budget deficit increased to R88.8bn, which was well above consensus expectations of R65.0bn. However, the preliminary cash data published in early January, showed a deficit of R92.0bn. If the latter is taken into consideration, the consensus forecast should have been for a larger deficit. National Treasury’s forecast revision in the February 2023 Budget Reviewe, would undoubtedly have taken this outcome into consideration.  SARS has the breakdown of revenue available at the end of each month and submits to National Treasury. Expenditure, which is in National Treasury’s domain, is adjusted for cash flows, which can create some volatility.  

Fig 1 Cumulative budget deficit 

• The main reason for the wider deficit was an acceleration in expenditure. Government spending has lagged the government target for a number of reasons: SDR transfers were more than R20bn behind target because only 7.4m received the SDR grant vs earlier estimates of more than 10m, the transport department spent only 50% of its budget by December and “financial asset transfers” (support to SOE’s and specifically Eskom that receives R23bn, was lagging. In January, spending accelerated by 29.3% compared to the same month in 2022. The main contributors were current spending (which is seasonal) and transfers to SOEs (Eskom received the final R10bn disbursement). January’s spending accelerated by 29.3 y/y%. Note that National Treasury revised spending estimates for F22/23 down by R13bn.

Fig 2  Expenditure – Note that only the total spending forecast has been revised with Feb’22 revisions

• On the revenue side,  National Treasury raised its F23 forecast by R10bn: PIT (+R5.5bn) and CIT (+R12.1bn) and VAT (-R11bn). In January, gross tax receipts increased by 5.8* (YTD: +7.5% VS A TARGET OF 7.6%). VAT is lagging behind the 7.6% and 7.5% target, as VAT refunds remain ahead of target.

Fig 3 Revenue YTD vs budget target