Finance Minister Enoch Godongwana at a press briefing before his 2023 Budget Speech in Parliament on 22 February 2023. (Photo: GCIS) 
The initial market reaction is always a knee-jerk indicator of a South African budget's reception with investors - read capital - and the initial reception was positive.
The rand immediately rallied against the dollar after the minister began speaking, rising to 18.13/dlr from 18.29 previously. It then pared those gains to 18.20/dlr about an hour later, but it was a marked contrast with President Cyril Ramaphosa’s Sona earlier this month, when the rand extended its 2023 losing streak.
Meanwhile, the yield on the 10-year government bond fell 11 basis points to 10.185% from the 10.295% it was fetching around the time the minister began speaking. A bond’s yield and price have an inverse relationship and lower yields mean lower borrowing costs for the government. So the bond market really needs to be convinced that the risk of holding the debt is abating.
And the JSE — which is not, it must be said, as sensitive to budget speeches — reversed its earlier losses. The JSE’s all-share index was down 0.60% about an hour after the minister started speaking compared to being 1.0% lower earlier.
“The budget did provide what markets are looking for, the government has absorbed a substantial portion of Eskom’s debt. Of course, it does push up the government debt to GDP ratio, to 73.6% from the previous 71.1% peak, but it seemed to be largely credit neutral. The ratings agencies already incorporated Eskom’s debt into their credit rating review and so, from that perspective, it is not credit rating negative,” Annabel Bishop, Chief Economist at Investec, told Business Maverick.
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The consolidated budget deficit will decline from 4.6% of GDP in 2021/22 to 4.2% of GDP in 2022/23.4% for the upcoming year and reaching 3.2% of GDP in 2025/26. So things are moving in the right direction, or at least that is the forecast which will hinge among other things on the economic growth forecasts panning out — an area where Treasury has tended to overshoot incorrectly.
“Real GDP growth is projected to average 1.4% from 2023 to 2025, compared with 1.6% estimated in October,” the minister said. The markets were certainly expecting a downward revision, but time will tell if the forecast hits the mark.
“Minister Godongwana’s 2023 budget speech, which provided details of spending and revenue collection proposals to implement the government’s plans to address SA’s energy crisis and socioeconomic challenges, were a welcome change for the nation. However, whether these initiatives will be a cure or merely serve as a band-aid for some of South Africa’s major issues, time will tell,” Shawn Duthie, an Associate Director with consultancy Control Risks, told Business Maverick.
“Good news for businesses in South Africa will be the ability to deduct 125% of its investment in renewable energy. With no size threshold on the projects that qualify, this will incentivise large and small businesses to invest in solar, wind and other renewable projects for their own operations, easing the strain on supply,” he said.
Read more in Daily Maverick: “Government plans to offer tax rebates for solar panel installations at homes”
So for now, give the minister a Bell’s — which will now cost 4.9% more.
Having said that, the minister did conclude his budget speech by saying: “Mr Bell, a Bell’s to you, and the thousands of public servants who work behind the scenes to keep our country going.”
The rand would not be at these levels and bond yields would be much lower if it were not for the failing state that “public servants” have let crumble under their watch. Godongwana has clearly not been to a Home Affairs Office lately or driven a rural or small town road. If he didn’t reside in a bubble, he wouldn’t be giving a public servant a Bell’s. DM/BM