Government must not shy away from the tough calls, says BLSA

20/02/2018 | By Admin

“Administer the bitter medicine now, rather than later,” said Business Leadership South Africa CEO Bonang Mohale ahead of the delivery of the 2018 Budget.

BLSA is committed to supporting the efforts of government to stabilise public finances and move the economy forward when the finance minister presents the budget in parliament tomorrow.

“There is positive sentiment in our country right now – starting with the conclusion of the 54th national conference of the ruling party, the successful trip by Team SA to the World Economic Forum in Davos last month and the election of Cyril Ramaphosa as president of our Republic last week and the State of the Nation on Friday. We need to build on this momentum by delivering a budget that supports the ambitious but achievable plans announced by President Ramaphosa. We are ready to engage with government on our ideas on how economic recovery can be secured. We are willing to partner with other social partners and government to help pull our economy from the brink,” said Mohale.

He added: “Also of critical importance, is ensuring that the responsibility of budget formulation is moved from the Presidency as has been reported back to the National Treasury as soon as possible in keeping with the Constitution.”

Amongst the key challenges facing the country will be plugging the fiscal gap, estimated to be about R50 billion at the time of the Medium Term Budget Policy statement in October, through a mooted increase in Vat from 14% to 15%, which is expected to bring in R22 billion. This will be the first Vat increase since South Africa became a democracy in 1994.

“It seems to us that the job of addressing the fiscal gap will be painful, especially to the poorest of the poor, but has to be undertaken regardless. For this, we are sympathetic to the unenviable task the minister of finance has to embark on,” said Mohale. Another critical area to address is the public service wage bill, which has consistently exceeded projections.

“We are pleased that the reduction of Cabinet positions is about to be implemented. It’s important that all of us make sacrifices to reduce costs,” said Mohale.

“The governing party has to start the conversation about moderating wage increases, freezing of vacant posts and other measures before we reach the uncomfortable stage of having to downsize or right-size sections of the public sector. These are unpalatable truths to discuss especially in the run-up to a general election,” said Mohale.

BLSA encourages government to continue on its path of fiscal consolidation and continue to implement cost-saving measures.

The budget will also need to provide concrete plans on how government will fund the commitments it has made with regards to higher education, especially for parents who earn a combined R350 000 income a year, whose children will now study for free at first year, without compromising the delivery of social services.

The other area to address is infrastructure spending which has been a key driver of growth over the past decade and, along with sound financial regulations, shielded South Africa from the worst effects of the recession.

“We welcome the efforts of government to fixing the governance, leadership and capital structures of State-Owned Enterprises to enable them to drive infrastructure spending and create jobs, and hopefully soon we will reach a point where government guarantees are used to support capital expenditure programmes of these SOEs instead of keeping these entities afloat,” he said.

BLSA is encouraged by President Ramaphosa’s undertaking to assemble a team that will speed up projects including water projects, health facilities and road maintenance.

Mohale also called on the National Treasury to spell out the trajectory of how it plans to address the national debt, which was forecast to grow by an upwardly revised R231 billion in the MTBPS, up from R188 billion at last year’s budget. South Africa’s debt increased dramatically following the recession as government embarked on counter cyclical spending.

“Relying on the sale of state assets is a short-term solution, what’s required is a durable solution to the debt problem,” he said.

Finally, BLSA has urged government to take advantage of the improved global economic environment by introducing measures to stimulate export-led economic growth.