MTBPS: The bad, the ugly and very little good
7 November 2023
It was always going to be ugly, but the November Medium-Term Budget Policy Statement was a stinker. The one thing markets look for, no matter how bad the budget, is a confident delivery. The MTBPS was anything but confident. In fact, it was poorly delivered, lacked conviction and left the markets and business seeking direction. At a minimum, government must shape the macro-policy environment, particularly Treasury.
Instead, business was left to take in and deal with the bad news, while reading the tea leaves of future fiscal and monetary policy. Indeed, one of the few pointers towards the February 2024 budget is R15 billion of tax increases are heading our way. With business and the tax compliant consumer already tapped out, it is difficult to see how future increases in personal income tax rates, corporate tax or VAT can be justified or sustained under current economic conditions.
But before discussing the substance of the MTBPS a few other issues bear highlighting. The first point to note was that it was late. Such is the state of the country’s finances, that the MTBPS was, in fact, due to be delivered a week earlier and was not ready. This is the first time that Treasury has missed its own delivery date and gives rise to concerns about the capacity and functioning of this critical Ministry and Department.
By definition, Treasury is the core of all government business and an inability to prepare a MTBPS on time not only suggests dysfunction, but also sends a negative signal to other government departments, the private sector and international investors. Admittedly, Treasury has been without a Director General for some time and the newly appointed incumbent has had little time to imprint his authority, but this is no excuse for missing such a critical deadline for public confidence. It must never happen again.