Treasury points to structural reforms for 3% growth
THE TREASURY said yesterday that reforms to alter the underlying structure of the economy could boost gross domestic growth by 3 percent in the next decade.
This was after the government painted a bleak picture of an economy struggling to gain traction as it slashed this year’s growth forecast to a pedestrian 0.7 percent, down from 1.5 percent it projected in February.
This means more South Africans were likely to join the unemployed ranks with the economy growing well below population growth.
Treasury in the Medium Term Budget Policy Statement said the revision was due to lower production by agriculture and mining in the first half of the year, as well as a lack of new investment.
“Necessary structural reforms include modernising the energy, water, transport and telecommunications industries; lowering barriers to entry and addressing distorted patterns of ownership through increased competition and small business growth,” the Treasury said.
The government also wants to enable growth in labour-intensive sectors such as agriculture and tourism, promote export competitiveness and reduce the cost of doing business.
In the medium term, the government aims to establish policy certainty, restoring investor confidence and addressing challenges at state-owned entities.
The Ramaphosa administration has in recent months taken concrete steps to placate the investor community by addressing the policy uncertainty bottleneck.
The Department of Mineral Resources has finalised the Mining Charter, and indicated that it would withdraw the Mineral and Petroleum Resources Development Act Amendment Bill.
Power utility Eskom has moved to sign 27 outstanding power-purchase agreements with independent power producers, while the Department of Energy has updated the Integrated Resource Plan for consideration by legislators.
The government also noted that the country had experienced an extended period of weak investment. The Treasury said: “Growth in gross fixed-capital formation, after slowing to 0.1 percent in the first half of 2018, is expected to measure 0.9 percent for the year as a whole, and 2.9 percent by 2021.”
President Cyril Ramaphosa is currently on the hunt for $100 billion (R 1.43 trillion) investment to reignite the troubled economy.
This hunt will culminate today in an investment conference comprising both local and international investors.
The recent activity data has shown an economy huffing and puffing its way out of the first recession in nearly a decade.
The mining sector, which has suffered from policy uncertainty in recent years, has continued to underperform in the third quarter of the year, while manufacturing and retails sales have seen a slight recovery.
To support the manufacturing industry, the government earlier this month, through the jobs summit, committed to work together to support the procurement of locally manufactured, competitively priced goods.
Treasury yesterday warned that the erosion of capital stock over the past decade was likely to constrain the long-term growth of the manufacturing sector.
The Treasury also said that the short-term outlook for the sector had improved, while it acknowledged that the creation of separate oil and gas legislation would also improve the investment environment in the mining industry.