The South African economy is in serious trouble. This was confirmed in Finance Minister Malusi Gigaba’s Medium-Term Budget Policy Statement, which gave a frank acknowledgement of the dire state of the South African economy.
Of concern is the fact that the statement offered little in terms of practical and achievable ideas to boost an economy set to grow a mere 0.7% this year, with total debt projected to rise to a staggering 60% of GDP by 2022. South Africa needs decisive and considered leadership, willing to take the decisions needed to ensure the interests of all South Africans are protected. A huge gap exists between the Minister’s rhetoric and the macroeconomic indicators which point to a worsening situation.
With the world economy showing signs of expansion, and global growth heading north of 3.6%, South Africa’s problems are self-inflicted because our economy is moving in the opposite direction. The reasons for this are well known, and they include policy paralysis, institutional weakness, a definite crisis in leadership, state capture and wide-spread corruption which has weakened confidence among investors, business, general consumers and large sections of civil society.
The minister is in an incredibly difficult position in trying to navigate a complex political environment with the December ANC policy conference looming, clear stalemates in government and a massive trust deficit between private and public sectors.
It was encouraging to hear him say that he and Minister Rob Davies support the new Financial Sector Code and we hope that it will be gazetted soon. His call for renewed effort to find agreement on the Mining Charter is both apposite and timely.
Neither growth enhancing measures nor impediments to growth were addressed. Also, there was no serious commitment to the structural reforms necessary to place South Africa on a firmer growth path.
The minister announced a determination to remain within the expenditure ceiling, but the measures this will require are enormous. Selling the government stake in the future-safe Telkom to fund the SAA pit is unwise, to say the least. We do, however, welcome the measures taken prior to this speech in removing the Chairperson of the SAA and appointing a capable board.
Curtailing spending is also all very well, but there is precious little left to cut without doing real damage to social programmes. As always, the poor will be the first to feel the pinch of our sluggish economy and the lack of policy certainty to get us on board the global growth train.
The budget was apparently prepared in accordance with a mandate paper by the Department of Planning, Monitoring and Evaluation. No one in broader society has had sight of this paper. This goes against what South Africa is known for globally, which is transparency in the manner in which the budget is formulated.
There is a need for greater transparency in how the South African budget is drawn up, not to mention greater policy coherence and focused strategies that broader society can confidently align behind towards inclusive growth and prosperity for all.
This MTBS is a stark reminder of the conundrum we face as a country, primarily as a result of devastatingly poor leadership by the President and those around him who have relegated national interest to their personal agendas. The country has been at a crossroads for years and we continued to take the wrong turns. The MTBS shows we are now at a T-junction and have only one choice to put SA onto an inclusive and sustainable growth path. That choice includes building confidence in our economy to attract substantial local and global investment and avoiding further sovereign downgrades.
The President needs to do the following to enable the country to make the correct turn:
The Banking Association SA remains committed to working with National Treasury and the rest of government in a partnership towards growth.