Tough times require bold decisions

Thursday, October 26, 2017

Finance Minister Malusi Gigaba says government needs to fast-track reform and make difficult, bold decisions in order to return the economy to a desirable growth path.

The Minister briefed the joint sitting of Select and Standing Committees of Finance and Appropriations in the National Assembly on Thursday.

When he tabled the Medium Term Budget Policy Statement on Wednesday, the Minister said a low economic growth and low tax compliance has strained the national purse with tax revenue collections being at concerning levels.

Over and above a revenue shortfall, he announced a risk of breaching the expenditure ceiling following the recapitalisation of the SA Airways and the SA Post Office. Government has decided to sell a portion of its Telkom shares to avert the expenditure ceiling breach with an intention of buying the shares back in the future.

Briefing Members of Parliament at the joint sitting, the Minister said he gave a frank overview of the economic and fiscal outlook of the country.

He said National Treasury needed to present this bleak picture to the nation and to also say much of what needs to be done.

Uplifting the economy remains within the hands of all sectors of the economy.

“We need to do the right thing to increase the pace and scale of reform to be decisive in the actions that we need to take.

“One of the questions … has been whether we are detracting from what has been a path of fiscal consolidation and the answer is clearly no. We need to be concerned as South Africans that whereas both the global outlook as well as the Sub-Saharan outlook are positive, that the South African economy’s performance remains subdued trailing behind the growth curve that is being experienced both in Sub-Saharan Africa and globally,” he said.

In his mini- budget, the Minister announced that while economic growth has had to be revised downwards, government’s consolidated budget deficit was set to widen to 4.3% of the GDP this year – higher than the February Budget targeted deficit of 3.1% of the GDP.  

He told Members of Parliament on Thursday: “We need to address the reasons why this is such, why our economy is performing in that way and ensure that we lift the business confidence, the investor confidence and address the challenges that we are facing.

“I think what the statement represented yesterday … was that the times are tough, but we have got to be tougher, to be bold and get ourselves out of the present situation because if things don’t change then we will find our debt escalating … and we will find ourselves unable to instil confidence that we are able to manage finances as well as we should and of managing our economy as well as we should.”

National Treasury Director General Dondo Mogajane said the department was committed to making tough decisions.

He said radical economic transformation is required to change the economy to include South Africans and government’s budget is progressive and redistributive and makes large contributions to transformation and growth.

Government, said Mogajane, remains committed to a path of fiscal consolidation and maintaining the expenditure ceiling over the medium term. The only sustainable solution for the country’s development and the health of the country’s finances was to grow the economy inclusively.

Among the other measures aimed at changing the course of growth, he said interventions need to improve the competitiveness of manufacturing exports and to promote localisation and reindustrialise the economy.

He said work was underway to license broadband spectrum, to optimise government’s asset portfolio and to reform the governance of state-owned companies and to also encourage private sector participation.

A stronger package of measures to stimulate economic growth is being developed, the Director General said. –

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