Prudent fiscal management supports economy
THE SOVEREIGN debt crisis playing out in Europe is a stark reminder of the importance of a country’s fiscal stability and sustainability. Greece’s struggles show the dire consequences of what happens when there is a loss of confidence in a nation’s ability to pay its debts.
Since the start of our democracy we have always placed strong emphasis on how we manage our economy and this continues to form the base of our economic stance even today.
Our prudent fiscal management and monetary policies have given rise to high levels of macroeconomic stability, promoted competitiveness and increased the economy’s outward orientation.
We had experienced first-hand the repercussion of a poorly managed economy when at the end of apartheid the new democratic government inherited an economy that was technically bankrupt, had low growth and weak job creation.
The economic woes at the time stemmed from the long-term effects of apartheid’s distorted policies. Moreover, it was structured to serve the needs of some rather than all; it focused on the needs of corporations rather than people.
The key economic policy decisions implemented by the new dispensation over the years has begun to transform the economy and instill strong confidence among international investors and South Africans alike. This prudent stance continues to underpin our economic stability and fiscal discipline. It has allowed the economy to remain robust where other countries have buckled under tighter conditions.
Last month international rating agencies Fitch Ratings and Standard & Poor’s affirmed South Africa’s stable rating as a result of the government’s fiscal consolidation and expectations for the economy to improve by 2017. They acknowledged that the country’s broad political and institutional stability, policy continuity and fiscal prudence had helped contain the its fiscal and external balances.
Collective responsibility
While we are a far cry from anything close to a “Grexit” – the heightened financial turbulence in Greece that could have seen its exit from the euro zone – we still need to pull together to support our economy.
President Jacob Zuma referred to this as our “collective responsibility” to get the economy to perform at its full potential.
South Africans can support the economy by buying locally made products. Every purchase has a knock-on effect, stimulating demand for local products and services, building our industries and
The private sector also has an important role in driving investment and partnering with the government to develop the country. They are encouraged to match the government’s investment to help drive the economy.
The government, for its part, has declared the economy an apex priority and is creating the necessary environment for investment to flourish. Earlier this year, Zuma unveiled the Nine-Point Plan to ignite growth and deal with the economy’s main constraints.
It is part of a ‘big push’ to stimulate key economic areas and catapult growth. As part of the plan, we are opening new growth areas such as the oceans economy, the green economy and shale gas exploration.
The approval of the final regulations for shale gas exploration has allowed the processing of applications from energy companies that are interested in exploring shale gas in the Karoo basin. A recent study by Royal Dutch Shell highlighted that extracting 50 trillion cubic feet in the Karoo basin would add $20 billion (about R252bn) to the economy every year for 25 years and create 700 000 jobs.
Our investment in ocean economy industries, such as marine transport and manufacturing, off-shore oil and gas exploration and aquaculture, has the potential to contribute R177bn to gross domestic product and create more than 1 million jobs by 2033.
Moreover, as part of the Nine-Point Plan, we will tap into the employment potential of the agricultural sector. The government will invest R2bn to establish Agri Parks in all 53 district municipalities to create employment opportunities.
The government is targeting the small business sector and has set aside 30 percent of state procurement for small businesses and co-operatives. A framework to strengthen and regulate the informal business sector is also being developed.
Mining
Through the plan, the mining value-chain for new manufacturing sectors is being promoted and an agreement with mines to procure up to 70 percent of mining inputs from local manufacturers is being finalised.
Our efforts are guided by our long-term vision in the National Development Plan, which foretells sustained growth, higher investment and a deracialised economy that benefits all South Africans.
The government is making every effort to manage the economy effectively and to realise its full economic potential. Through our sound economic footing we are on a path to emerge stronger and more resilient as we move South Africa forward.
Leslie Sedibe is the chief executive of Proudly SA