South Africans had high hopes for Finance Minister Tito Mboweni’s maiden mini-budget speech, particularly after his unexpected pre-speech engagement with the public on Twitter. Subsequent reactions, however, have been less than optimistic, following announcements that included rising budget deficits, tax revenue shortfalls, increasing gross national debt and a downgrade in economic growth projections.
Short-term results have included an almost immediate dip in the rand and plummeting hopes for a positive outcome from upcoming reviews by ratings agency, Moody’s.
According to Tony Clarke, MD of the Rawson Property Group, however, the outlook isn’t necessarily as gloomy at it appears – particularly for some segments of the property market.
“I think the first thing we need to appreciate from Tito Mboweni’s speech is the honesty with which he presented his assessment of our country’s economic situation,” says Clarke. “It was exactly the kind of wake-up call we need if we’re going to address the issues that we have. Sugar-coating things is seldom to anyone’s benefit, and it’s a relief to know that our Finance Minister doesn’t have his head in the clouds.”
While Mboweni did not give any clear direction on reducing South Africa’s deficit, he did acknowledge the need to live within budgetary restraints and stressed the importance of government accountability and fiscal discipline. This, Clarke says, bodes well for future policy decisions over which Mboweni – who has been Finance Minister for mere weeks – will have significantly more influence.
That’s not to say there were no positive announcements in the Medium-Term Budget Policy Statement (MTBPS) in the interim, however.
“The emphasis on funding for areas like water and electricity services and infrastructure is reassuring in the wake of recent supply shortages,” says Clarke. “Agriculture is also set to receive support, both through direct drought relief measures and productivity-focussed land reform. All of these things should contribute to future resilience and economic recovery, with similarly positive knock-on effects for property.”
Plans to revitalise infrastructure like road networks and public transport will also have beneficial economic effects, and could, according to Clarke, affect the property market more directly.
“Things like the extension of Cape Town’s MyCiti bus network will stimulate market growth in outlying areas,” he says. “Improvements to public transport networks, in general, should also make job access in major centres easier and more available. This, combined with R669 million to be invested in government-owned industrial parks in township areas, could help offset unemployment rates, increase consumer spending power and stimulate the affordable property market segment.”
The affordable segment will also receive direct support in the form of R1billion in housing subsidies. Clarke says this is an important step towards enabling low-income earners to get a foot on the property ladder.
“It’s a great example of an area in which the mid-term budget demonstrated awareness of the underlying factors that continue to limit our economic growth,” says Clarke. “Education initiatives, property ownership, employment, food security – these things all contribute to building a more financially stable and productive population. It might not be enough to carry us through the next couple of years completely unscathed, but it does inspire hope for the future – one of the most influential forces behind a healthy property market.”
Alan Straton
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