The much anticipated Medium Term Budget Policy Statement (MTBPS) that was delivered in Parliament this week by Finance Minister, ComradePravin Gordan, is a good response in the difficult economic and political conditions facing South Africa.
The MTBPS sets out a detailed programme for the next three years that balances inclusive growth, economic transformation and fiscal sustainability. It’s now up to all of us to unite around this programme in order to take the country forward.
The main challenge facing South Africa today is economic growth that grew by only 0.5 per cent this year, this is much too low. This means that we do not have the resources we need to increase service delivery.
In the short term, the key problem is lack of confidence and hope for the future. This is reflected in a contraction in investment, the first time this has happened since the recession. In part this is the result of us scoring “own goals” – hurdles that we have placed in our own path.
South Africa needs to boost confidence that will enable us to know where we are going. We have to build trust with investors, so that they invest resources in our economy. If there is uncertainty about politics and suspicion of government; if our people do not have a strong sense of hope about the future, then investors will not invest in that future.
But, not all is lost, we think the worst is now over and the economy will begin to recover from the next fiscal year. In order for such positive results to happen, we need to act decisively, and with a renewed sense of urgency. If we don’t, the recovery will not be strong enough to begin reducing the high rates of unemployment, especially among the youth, and poverty. What we need as matter of urgency is a programme of action.
There are key programmes that the ANC-led government will need to pay closer attention to in order for the economy to grow.
Concluding the Mineral and Petroleum Resources Development Act (MPRDA)
We are pleased that both the National Assembly and the National Council of Provinces are moving with speed to conclude amendments to the Act.
Reviving investment in mining and agriculture
Mining has been negatively affected by both commodity prices and our politics. However, currently, there is an improvement in commodity prices while agriculture is still suffering from the effects of the most severe drought the country has witnessed in 22 years.
Building consensus on labor market reforms
This is also one of the areas where tremendous progress has been made on both the minimum wage and the management of strikes
Announcing a framework for private co-investment in infrastructure and state-owned companies
There is a pressing need to restore confidence in the governance of our state owned companies.
Building cohesion in both government and the ANC
Not only must growth be faster, it must also be more inclusive. This means we need growth and economic transformation.
That translates to protecting the sustainability of the fiscus in order to sustain redistribution. Anything that undermines our fiscal institutions is in fact anti-transformation, because these institutions have to deliver taxes taken largely from the wealthy to finance economic social change for the masses of our people.
As the governing political party, we have to focus on labor intensive sectors such as; mining, agriculture and services. It can’t be that in the name of transformation we undermine investment in these sectors, resulting in job losses.
Also, we must act to prevent de-industrialization, and build our manufacturing sector. We have managed to achieve real big exchange rate depreciation, and currently, the country is in a position to be more competitive with its exports. Inclusive growth also means the transformation of the economy, the form of transformation that must achieve real change in the lives of all our people. It must create new patterns of ownership and participation in the economy that reflects the future, not the past.
The ANC must come to a realization that the type of economic transformation currently at play has failed in that it only get contracts for a few black people who happen to have political connections. Rather than being seen as enabling corruption that results from the relationships formed between politicians and the politically connected, we need to open tenders to all. Wealth must be distributed to the masses just not just a few. It must be fair and transparent.
All our people must benefit not a few insiders.
We must applaud Cde Gordan because the MTBPS has achieved a difficult balancing act for fiscal sustainability. We cannot carry on borrowing so much to pay for services. We already owe R2 trillion and its rising fast. We have to stabilize the situation.
But we also have policy aims; the National Health Insurance, a better deal for tertiary students and a better quality early childhood development. All these things are important for the future of our country but we cannot continue to pay for such essential programmes by borrowing. We have to reignite economic growth to generate the resources that are needed the country’s future needs.
The MTBPS was able to propose a measured, balanced fiscal consolidation, but also sustain funding on the most important priorities. There is very fast growth in allocations to universities and students from poor and working class backgrounds. Social protection and health also grow fast in the next three years.
Tax increases, which are painful but necessary, were also proposed for the next fiscal year. We already have a progressive tax system. All we need to do is built on it. But, ultimately reigniting the momentum of growth is the only sustainable alternative to more taxes.
CDE ENOCH GODONGWANA IS THE CHAIRPERSON OF THE ANC NEC SUB-COMMITTEE ON ECONOMIC TRANSFORMATION