JOHANNESBURG – This week’s Medium-Term Budget Policy Statement, delivered by Finance Minister Tito Mboweni, offered up some insights into the country’s depressed economic state.
The Minister’s speech, however, hinted that while the situation may seem dire, with the right fiscal discipline and follow through, there might still be some light at the end of the tunnel for business owners.
Here are five key takeaways:
1. We are far from where we need to be:
Growth for 2019 is down to 0.5 percent from the 1.5 percent forecast in February, and Mboweni conceded that tax collection is 4 percent off projected targets, with more than R50 billion still to be collected. To make matters worse, national debt levels continue to worsen, exceeding R3 trillion this year and expected to rise to R4.5 trillion in the next three years. This means that our debt-to-GDP ratio is set to reach 70 percent over the next two years, which is undesirable given the extremely high cost of servicing debt.
2. But we have a plan
Mboweni referenced the paper titled “Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa”, which outlines a clear 10-point action plan to unlock growth for the economy. Growth is projected to slowly rise to 1.7 percent in 2022, which – despite being admittedly lower than what is required to turn things around – is more than triple the level of growth achieved this year.
3. Fiscal stability may still be in reach
While the current figures paint a gloomy picture, Mboweni spoke a lot to fiscal prudence, identifying areas of spending reductions and plans to stabilise debt. He emphasised preparing to reposition the country to grow and to thrive, and spoke to a commitment to narrow the deficit and raise the quality of spending.
4. A more conducive business environment is being promised
Mboweni noted that the barriers to entry and costs of doing business remain too high, and said that raising competitiveness in the economy would make it easier for businesses – particularly small firms – to compete against large, dominant players. He also voiced the need to prioritise job-creating sectors such as agriculture and tourism, and mentioned that the Department of Small Business Development will implement a new operational model to improve its support to small and medium-sized enterprises. Lastly, Mboweni added that there will be government efforts to accelerate spectrum licensing and a move towards 5G, which will increase access to connectivity and make it easier to do business.
5. Actions, however, speak louder than words
Following through on the proposed measures for growth is now critical to get the country’s economic engines up-and-running again. Considering that we had the state of the nation address in June, there has been very little time to see new initiatives come to life. That said, given the current economic malaise, now is the time to put words into action – particularly those short- and medium-term reforms outlined in the different recovery plans that can boost economic growth.
Ben Bierman is a managing director at Business Partners Limited.