This year’s medium-term budget policy statement (MTBPS) sees a marked deterioration in the budget deficit. The deficit, which is far worse than expected, is now at 6,2% of GDP (from 4,7% in the February budget speech). The key problem has largely been the lack of economic growth as well as mismanagement of Eskom finances.
Urgent need to implement economic reform
South Africa’s economy is now projected to grow by sub-1% this year and improve marginally to 1,2% in 2020. The efficient collection of tax remains a challenge. However, Agbiz trusts this will change with the appointment of a new SARS commissioner who is focused on rebuilding the institution.
This gloomy picture reminds us of the urgent need to implement economic reform in South Africa, underpinned by policy reform that will attract investment and cap fruitless state expenditure. Failure to do so presents the risk of falling into a ‘debt trap’ which requires the bulk of our income to be spent on debt repayments. This will cripple our ability to invest in social infrastructure and growth enablers.
“The key question now is how the rating agencies will receive this budget and the implications thereafter on the review of South Africa’s sovereign rating. We might know soon about Moody’s review which is due on Friday, 1 November,” noted Dr John Purchase, CEO of Agbiz.
This should also spark a sense of urgency among all South Africans to implement the economic reforms which will be outlined in the revised version of the National Treasury economic policy paper.
Agbiz endorses the National Treasury’s economic paper
“Agbiz and its members have already endorsed the National Treasury’s economic paper. We were particularly happy with the agricultural section of the paper. This section encourages joint-venture approaches to agricultural and agribusiness development; means to ease access to development finance; adequate and affordable agricultural insurance; improved extension services for smallholder and emerging farmers; enhanced trade promotion, market access, and access to water for irrigated agriculture; and investment in establishing innovative market linkages for smallholders,” said Dr Purchase.
“It is imperative that the value chain master plan that is currently being developed takes the public-private-partnership approach as a way to sustainable development and inclusive growth. It needs to be implemented with a great sense of urgency by all parties. This is, however, going to be a real challenge, given the current divergent positions and approaches of the main role-players,” Dr Purchase noted. – Press release, Agbiz