Finance Minister Enoch Godongwana.
South Africa’s Minister of Finance, Enoch Godongwana, delivered his much anticipated Medium Term Budget Policy Statement (MTBPS) on Wednesday to the nation.
Frank Blackmore, Lead Economist at KPMG South Africa told Business Report that Godongwana’s theme to the MTBPS was to promote a strategy to lift the economy to higher and more inclusive growth.
Blackmore said that the way this would be done, is through four pillars.
“The continuation and improvement of macroeconomic stability, including what the South African Reserve Bank has done as well as the government creating a conducive environment for economic growth. It can be argued that this has not been the case of the recent past. Not much elaboration was done on what this would look like in the future in order to create more economic growth,” Blackmore said.
Secondly, Blackmore said that the structural reforms to continue, including the second phase of operation Vulindlela.
“We have had some success in the power sector as well as in logistics and this is going to continue in phase two, focusing on the network sectors, electricity, transport and logistics, as well as water, which is which is good,” the KPMG economist said.
The third pillar is focused on infrastructure.
Blackmore said that the important point here was to mobilise private sector involvement, more private sector funding in infrastructure.
“The Minister mentioned that the PPP regulations would be amended in order to attract greater investment into such public sector projects. He also went on to mention a couple of these projects which will come over the near future. He also addressed the fiscal strategy, in other words, the continuation of the consolidation of the fiscus. These included a number of points, such as stabilised government debt - you would do so through creating a primary surplus, increasing infrastructure spending, to create more economic growth and more activity within the economy,” he said.
“Furthermore, protecting critical services was an important point that he mentioned and managing the public sector wage bill which will, of course, more in line with inflation, to reduce the growth of that. But after saying all of that, he still told us that both debt and the deficit are set to increase. The deficit as a set of GDP will increase from February’s 4.3 prediction to 4.7 and that debt will increase to a max of 75.5% of GDP in the 2025/26 year,” Blackmore said.
“Tax revenues, on the other hand, have moved the other direction and are estimated to come in around R22.3 billion lower than the February estimate and therefore tough decisions will need to be taken by government on the allocation of the revenue that they do get. Other mentions were things such as increasing the workability of local government, and specifically municipal debt. A lot was said about reducing the municipal debt in certain municipalities, increasing the strength of local government - very little was said in terms of how this would be done, besides mentioning that several initiatives are underway in this regard,” Blackmore told Business Report.
Other areas that we touched upon were disaster response and risk reduction would need to be focused on reforming and modernising the procurement system.
“We have heard that since the days of Praveen Gordon as Minister, and progress on the FATF grey listing, which is all important, obviously, for attracting increased investment to the country. So, all in all, although it's a Government of National Unity's first budget, pretty much the same as we've seen in the recent past, especially when it comes to spending more than the revenue that we're getting and increasing debt and deficit as a consequence,” Blackmore said.
BUSINESS REPORT