Treasury director-general Dondo Mogajane. Picture: ESA ALEXANDER
Treasury director-general Dondo Mogajane. Picture: ESA ALEXANDER

This was the best budget that the Treasury could have delivered under the circumstances, according to Treasury director-general Dondo Mogajane.

Delivering the keynote address at an Absa post-budget breakfast in Sandton, Mogajane said: “Moody’s [Investors Service] and Fitch [Ratings] had their say yesterday but, under the circumstances, this was the best we could put on the table with all the challenges we had. You’re damned if you do it, you’re damned if you don’t do it.”

Finance minister Tito Mboweni had to contend with declining tax revenues, a weakened SA Revenue Service (Sars), an unfavourable global economy and a challenging environment for emerging markets, Mogajane said.

“It’s not that we did not have an inclination that some rating agencies and investors would have a problem with our move, but we had to do what we had to do under the circumstances,” he said.

He said the challenge Eskom posed to the economy has come up in recent investor roadshows, which Treasury had acknowledged.

“Now the risk has materialised and we had to do something. We had very little space to do something about Eskom other than [what] we did,” Mogajane said.

Mboweni painted a bleak picture of SA’s ballooning debt on Wednesday as he announced a massive cash injection into Eskom. The Treasury will allocate R23bn a year for the next three years to the power utility in an attempt to support the urgent operational changes planned.

“We needed to do something. When we looked at Eskom and the challenges, the rot was deep. The state capture project was deep at Eskom in many ways,” he said, adding that in recent years the Treasury had looked the other way.

“What we’re doing now is plugging the hole.”

Mogajane said although there would be a backlash, particularly from labour, the Treasury would not bow to pressure.

“We took this stance despite populist rhetoric. In an election year, in a fiscally constrained environment, in a challenging state-owned entity environment, we decided we would not come under populist pressure in that budget,” he said.

On Thursday, Fitch said failure to implement a turnaround plan that stems annual losses at Eskom, and limits the future growth of contingent liabilities, would add to downward pressure on the sovereign ratings.

Moody’s said that until the government provides a clear and detailed plan of how Eskom will be restructured, the troubled power utility will continue to overshadow the country’s public finances.