South African finance minister expects economic boost

South African rand
South African rand

The South African economy should get a boost in the next 18 months with a number of jump-starts, Finance Minister Tito Mboweni said on Wednesday.

These include lower inflation, interest-rate reduction earlier this year, the recent gains in platinum group metals’ prices and the impending change to the electricity regulatory framework, the minister said in his budget speech in Parliament

A sound macroeconomic framework always lays the foundation for growth, Mboweni said.

“Budgets are complex, but the numbers are simple,” he said. “The numbers show that we have work to do.”

For 2020/21, revenue is projected to be 1.58 trillion rand (about 100 billion U.S. dollars), or 29.2 percent of GDP, while expenditure is projected at 1.95 trillion rand (about 130 billion dollars), or 36 percent of GDP, the minister said.

This means a consolidated budget deficit of 370.5 billion rand (about 25 billion dollars), or 6.8 percent of GDP, in 2020/21, according to Mboweni.

Steps are being taken to address South Africa’s lagging productivity growth and to reduce the cost of doing business, he said.

The BIZPortal, a platform designed to offer company registration and related services in a simple seamless digital way, will make it much easier to register a new business with the Companies Intellectual Property Commission, the South African Revenue Service, the Unemployment Insurance Fund, and the Compensation Fund in one day, according to the minister.

He mentioned the Competition Amendment Act, which came into force in July 2019 with the aim of strengthening the Competition Commission’s powers.

The commission has conducted inquiries into a number of sectors to strengthen competition, Mboweni said.

“South Africa is moving with the fourth industrial revolution. We are determined not to be left behind. We are relaxing regulations to help our flourishing FinTech sector,” said Mboweni.

He also talked about wasteful expenditure in the government.

“This is a vital step in restoring the confidence of the public in the government. We must get more value for our money,” the minister said.

The government is acting on fruitless and wasteful expenditure, he said.

Last year, Parliament amended the Public Audit Act to empower the auditor-general to refer matters to a public body for investigation and prosecution, take binding remedial actions and recover money directly from the culprits.

Mboweni explained that the task requires a dynamic and appropriate mix of quantity, quality, capacity and capability in the administration of the state.

“We are moving forward with reforms to the procurement system with a focus on value for money and maximizing the quality and quantity of services,” he said.

With the proposed Public Procurement Bill, the government will accelerate merging and consolidating public entities and propose a new law to stop excessive salaries in these public entities, according to Mboweni.

“We must also deal decisively with the excessive high cost of leasing government buildings,” he said.

According to the Business Union of South Africa, the country’s public finances “need fixing,” since revenue is insufficient to cover expenses and debt is heading toward unsustainable levels.

The organization believes that spending is imprudently directed toward consumption and debt-servicing rather than infrastructure and productive activity, a situation which will be compounded by worsening statistics including reduced GDP growth and a widening fiscal deficit.

Mboweni acknowledges he has a tough job at hand.

“Our economy has won before, and it will win again. We are part of the most vibrant continent in the world,” he said.

Winning requires hard work, focus, time, patience and resilience, Mboweni said. Enditem

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