Tax revenues are set on track to beat the budget target by a significant margin of approximately R85bn. Strong earnings growth by resource companies is providing a welcome boost to government tax revenues. However, the increase in non-mining tax revenues such as personal income tax, VAT and customs duties paid on imports remain weak relative to F19/20 levels. This reflects weak domestic fundamentals. The economy is forecast to return to pre-pandemic levels only by 2023.

The revenue windfall from mining companies will be channeled to finance the fiscal package announced by President Ramaphosa in July, estimated to cost nearly R40bn. Spending pressures on the government remain elevated...

The public sector wage bill is set to increase by R18bn over and above the social relief package after trade unions accepted the government’s revised gratuity offer.

The slope of the money market yield curve has flattened as the market’s expectation of the SARB front loading rate hikes in 2020, was premature. The tone of the July MPC  statement was more dovish than what was priced in by rates. Additionally, with government bond supply expected to remain unchanged, as revenue receipts could be adequate to cover additional expenditure, the SAGB yield curve flattened. However, we are waiting for direction from National Treasury as to whether the increase in the public sector wage bill would be deficit-neutral.