Finance Minister Malusi Gigaba’s first budget speech looms against a backdrop of allegations of “state capture of treasury”. A number of treasury officials have stated that all is not well in the finance ministry. Rumours exist of a parallel administration bypassing the existing structures with little or no consultation before key decisions are being made. In addition, in a move that is seen as unconstitutional, it was recently announced that the budget allocation process would be shifted from Treasury to the presidency to “ensure allocations were in line with the National Development Plan”.
There are also extensive rumours that Public Investment Corporation (PIC) funds were being utilised to fund State Owned Entities (SOE’s). Despite public assurances from Minister Gigaba that this was false, rumours persist that up to R100 billion is being requested to fund debt redemption commitments. The PIC does administer a fund, known as the Isibaya Fund, which invests in black economic empowerment and infrastructure development projects that help to create jobs, relieve poverty and transform the economy. It is possible that this fund could be utilised as a vehicle to fund SOE’s whilst still giving reasonable returns.
There will be tremendous interest on the 25th October when Minister Gigaba presents his first ever budget speech. With declining revenue collections, increased demands for education funding, housing, job creation, medical health insurance and a stagnant economy, Minister Gigaba needs to pull a few rabbits out of his hat. We will keep you informed of developments in this regard.