The credibility of finance minister Tito Mboweni's latest budget depends on his ability to stare down the cabinet and walk a political tightrope enforcing unpopular decisions, experts say. Mboweni's budget promised to consolidate public finances in a political season that demands decisions that will attract voters for the ruling party. SA will hold local elections this year.The minister's previous hard stances have been undone by his cabinet colleagues in the past, including when he was forced to allocate money to the state airline against his wishes late last year. "This budget is not populist. It does not play to electoral interests," said Richard Calland, political analyst and lecturer in public law at the University of Cape Town. The budget did not increase welfare benefits in line with inflation, as is usually the trend. "Mboweni is reducing the purchasing power, the livelihood of 17-million people who are the bedrock of the ANC's support in many respects," Calland said. This decision would lead to some significant pushback inside the ANC over time.Mboweni also announced that the R350 grant for the unemployed would be continued for three months. It would be difficult to eradicate this grant, introduced to help unemployed South Africans cope with the economic ravages of the pandemic.The National Treasury is banking on no increases in public sector wages in the coming years. Negotiations for the next multi-year annual increases will resume later this year. The government has sought to tear apart a previous agreement, in order that it did not have to honour guaranteed salary increases last year. It won a legal battle when the agreement reached in 2018 was declared unlawful in court, but the unions have appealed. Tensions with labour may be problematic as the year progresses as unions form a big part of the ANC's elections machinery. President Cyril Ramaphosa's government is centred on a consensus-building philosophy, which seeks support from unions at forums such as the National Economic Development and Labour Council (Nedlac). With other big government decisions related to economic reform, Eskom's restructuring will need the input and even support of labour at Nedlac if it is to enjoy political credibility. Taking on labour may not be a successful approach in an election year."So many of the guys who run the ANC branches are public sector workers, middle managers. If you are freezing their wages, that is potentially playing with fire," said Calland. "That adds to the sense of the perfect storm circling around the president and his reform efforts. Things could not be more difficult."The Congress of South African Trade Unions (Cosatu) criticised the government approach on public sector salaries. "We denounce and reject the posture adopted by the government and articulated by the National Treasury. We call on the government to respect the democratic institutions and abandon the unilateral imposition of a wage freeze for the next three years and engage unions at the Public Service Co-ordinating Bargaining Council about the way forward," Cosatu said in a statement. Mboweni has generally talked tough on financing of state-owned enterprises (SOEs). This week he allocated R7bn to the Land Bank, which is in a difficult financial situation with threats of yet another debt default. Even the best-performing companies, such as the Airports Company SA, have been badly affected by the Covid-19 economic environment. And the difficult trading environment suggests the number of SOEs with a voracious appetite for state bailouts may grow in the coming months. It will not be easy for the government to let SOEs default, said Simi Siwisa, head of public policy at Absa. "It starts to send a negative market signal about the government when defaults are routinely tolerated, and the willingness to default thus increases the perceived risk of lending to SOEs." Siwisa added that SA needs to learn from the experiences of countries that allowed defaults. "In China, a string of SOE bond defaults caused the interest rates of SOE debts to rise quickly in the secondary market." Allowing the defaults on guaranteed debt, a government could inadvertently be reducing confidence about the SOE, and increase the overall risk in the project, she said. "A government guarantee is used to reduce the cost of funding and enhance lending as many investors are unwilling to be exposed to the SOE risks. So, defaults are not desirable because they increase the cost of borrowing." The required juggling is a sign of the fiscal crisis in SA's public finances and the attendant political posers Mboweni and his colleagues will face during the year. SAA has requested more state funding, in addition to the R10.5bn in October. "The business rescue practitioners have made a request for R3.5bn. That still has to be interrogated to get to the veracity of it," Mboweni told journalists on Wednesday. The government has undertaken to restructure some of its ailing companies. This in itself is an expensive exercise that will require recapitalisation. Arms company Denel has struggled to pay salaries for several months. Five directors, including chair Monhla Hlahla, have resigned in the past four weeks. Denel's financial problems have exposed the board members to possible legal ramifications in terms of the Companies Act, insiders say.Board members can be held personally liable for the debts of their company when it has been found to have traded recklessly or negligently. Many of Mboweni's decisions need political backup from Ramaphosa as there would likely be a severe pushback from within the ANC, said Calland...