Fitch Ratings, one of the big three ratings agencies on which SA depends for its credit rating, has expressed doubt that Treasury has the ability to contain government spending pressures following the tabling of Finance Minister Enoch Godongwana's maiden budget on Wednesday. 

Fitch noted that even though SA’s revenue overrun of R180-billion over the past fiscal year had improved public finances, SA had continued to "breach expenditure ceilings, pointing to difficulties in containing spending". Fitch also warns that SA’s revenue bonanza – due to high commodity prices – will prove temporary. 

In his budget tabled on Wednesday, Godongwana split the R180-billion revenue, putting 55% towards "urgent spending" priorities and 45% towards reducing future borrowing. This has allowed the finance minister to stabilise government debt a year earlier than expected, at a lower level of 75.1% of GDP. 

The agency said that the new forecasts in the budget "reduce the near-term risk that investor concerns about debt sustainability could lead to a further surge in borrowing costs in the context of global monetary tightening and imply a further slowdown in debt accumulation".

However, Fitch said that the extension of the R350 Social Relief of Distress grant for another 12 months meant that it now expected a permanent grant of some sort to be put in place. This means the government will again breach its expenditure ceiling in the 2023/24 financial year as a result of the grant extension, it said.

"Although we anticipated the breach this year, it raises questions about the government’s ability to pursue fiscal consolidation if revenue forecasts disappoint or other fiscal risks materialise," said the agency.

SA’s problems can really only be solved by economic growth, "but so far, government initiatives and progress on implementation has been insufficient to make this likely".