Cut consumption expenditure, Mboweni urged
AS FINANCE Minister Tito Mboweni delivers the National Budget Policy Statement in Parliament today, analysts and captains of industry urge him to curtail consumption expenditure which could dramatically worsen the country’s already weak economic outlook.
This would further lower business and consumer confidence and so negatively impacting investment.
Experts said the Budget would be expected to show the government’s desire to shift some expenditure away from consumption to infrastructure.
However, with the very heavy current expenditure of chiefly civil servants’ remuneration, social welfare support and some other items, including rapidly growing interest payments on debt, little extra is left given the imperative to cut borrowing projections, according to Investec chief economist Annabel Bishop.
“The good news in the Budget could come from actual cuts to projected expenditure, as opposed to only cutting growth in planned expenditure, with restraint on the escalation of civil servant pay key in this regard.
“Expenditure projections in the 2019 Mid-term Budget Policy Statement urgently need to be cut to allow
South Africa’s government finances to become sustainable,” said Bishop.
She noted that hiking taxes – instead of cutting expenditure and thus the debt trajectory – would negatively impact consumers and, in turn, corporates facing these consumers, such as retailers, risking higher unemployment.
“The net effect would be for a further dwindling in real disposable (after-tax) income growth, which has been a key driver for the slowdown in economic growth in South Africa,” said Bishop.
Market watchers also urged him to offer concrete measures to boost exports and support small and medium enterprises while cracking down on corruption in state departments and entities.
South Africa needs more entrepreneurs than ever before, Mozambik restaurant-chain group chief executive Manny Nichas said.
“With sustained weakness in the economy, continued pressure on consumers and a growing number of job cuts, reliance on the usual notion of traditional employment amounted to nothing.”
The lengthy list of advice and wishes, prior to Mboweni’s Budget speech, includes a plea from the SA Canegrowers Association (SACG) to urgently halt the sugar tax, which the association said was crippling the sugar industry and causing thousands of job losses.
Meanwhile Mboweni needs to offer more concrete proposals to truly turn things around when he delivers the Budget speech.
This is according to David Morobe, executive general manager of Impact Investment at Business Partners, who yesterday said that a key area for the government to focus on was increasing the competitiveness of the country. “This, in turn, will make South Africa more investor-friendly, spur economic activity and assist with issues like unemployment.”
While President Cyril Ramaphosa made some good commitments in the State of the Nation Address, the small and medium enterprise (SME) sector is hoping to get more clarity from the Budget speech.
Morobe said while South Africa’s ranking in the Global Competitiveness Report had improved, rising seven places to 60th in 2019, he believed there was still a long way to go – particularly in improving the ease of doing business in South Africa.
“Contrary to President Cyril Ramaphosa’s goal to be ranked amongst the Top 50 countries on the World Bank’s Ease of Doing Business Index, South Africa fell two places from 82nd to 84th in the most recent report.”