With today’s budget, government has shown its willingness to take some of the hard decisions necessary to restore fiscal stability, but much more serious work needs to be done to ensure fast, sustainable economic growth, the only way to secure investment and create urgently needed jobs. However, under the present difficult circumstance, it is a fair budget that seeks to fairly distribute the hardships that now face us as a country.
While the one percent increase in Value Added Tax (VAT) was necessary, we are aware that it will be a drag on consumer spending, a major source of economic activity in South Africa. Considering this, the smaller increase was a reasonable decision. Businesses and consumers will also feel the effect of the increased fuel levy, among the other proposed taxes.
The decision to increase VAT was an important signal that government is willing to take unpopular decisions to restore the fiscal health of the country. This will further boost investor and business trust and confidence.
We applaud the efforts of government to mitigate the effects of VAT on the poor, by increasing social grants. Social grants are one of the country’s most effective poverty alleviation programmes and we once again underline the commitment of South African banks to helping develop an effective payment system, as required by the Constitutional Court, by 1 April 2018.
The renewed commitment to good governance in the public service – especially the South African Revenue Service – and state-owned enterprises by the minister is acknowledged. However, much more needs to be done to recover the many billions lost to corruption and fruitless and wasteful expenditure. The aggressive recovery of these funds will do much to narrow the budget deficit and restore the confidence of taxpayers, who will now be working harder for less disposable income.
While government has made significant commitments to reducing its expenditure and the budget deficit, many of the proposed cuts will not be enough and the public service wage bill must still be reduced in a responsible manner. We look forward to the restructuring of the executive announced by President Ramaphosa in the State of the Nation Address, for possible areas where meaningful trimming of the public services will take place. Regarding state-owned enterprises, the focus must now be on securing private sector investment and skills, rather than bailouts.
Trust and confidence-building on their own are not enough – action must quickly follow. If we are to secure investment in those sectors where we have comparative advantage and can be truly world class: like mining, agriculture, tourism and manufacturing, then South Africa needs to make bold structural reforms that will encourage inclusive economic growth and job creation.
While the financial sector is a willing partner with government, creating the right environment for investment, growth and employment requires concrete investment programmes and appropriate regulation.
As BASA, we share the government’s commitment to transforming the financial services industry and strengthening the regulatory system. Banks are getting ready for the introduction of the Twin Peaks authorities that will be established sometime this year, and which aims to improve market conduct and strengthen prudential regulation. We are committed to maintaining and sustaining South Africa’s world-class financial system and also welcome the licensing of new banks, increased competition and innovation in the industry, and the regulation of digital financial services.
We will continue to support the transformation of the economy and the financial services sector. We look forward to presenting our achievements and challenges, in financial inclusion and empowerment initiatives, at the coming financial sector summit.
This budget has bought us time to take advantage of increased global economic growth and the boost in trust and confidence brought about by the promise of better governance. We must now work together to put into action the promises we have made as a country