The South African Chamber of Commerce and Industry (SACCI) is pleased with the Medium-Term Budget Policy Statement (MTBPS) statement of Minister Pravin Gordhan. The main message is a commitment to the stabilization of government spending that will lessen the overall tax burden on the country. The commitment to reducing the fiscal deficit and government debt indicates greater emphasis on fiscal sustainability that could have a positive influence on our credit ratings and foreign investor perceptions.
SACCI welcomes the following comments:
Certainty on fiscal sustainability will improve South Africa’s credit rating
It is clear that the fundamental message is one of fiscal prudence to allay fears of unsustainable debt, but SACCI would like to have seen a direct acknowledgement of the impact of the credit rating downgrades on investor confidence and foreign funding. The upward revision of the budget deficit over the medium term partly reinforces the concerns voiced by the credit rating agencies.
Stabilized government spending will lead to lower taxation
The stabilization of spending through savings and efficiency gains is very positive as it could indirectly reduce the tax burden faced by business and fosters a culture of sound governance across the public sector. This reinforces SACCI’s view that South Africans deserve more for their taxes.
Plans to improve local service delivery
The increase in transfers to municipalities together with expenditure discipline should go a long way towards addressing crippling local service delivery failures, although it is unsure whether the increased transfers are sufficient considering the current constraints faced by local government.
SACCI would’ve liked to hear more on the following:
Public sector wage bill
Although the MTBPS is underpinned by fiscal prudence, one area that exceeds forecasts is the public sector wage bill. SACCI would like to see equal prudence applied in this area of public finance.
Detailed plans to reduce the cost of doing business
The Minister does mention support to SME development, but similar commitments have been made in the past without significant delivery. The crucial problem stifling the growth of the small business sector is the regulatory burden. SACCI would want to see definite plans towards reducing the ease and cost of doing business.
Private sector participation in infrastructure development
SACCI welcomes the statement by the Minister that the substantial funding amount required by the infrastructure would require outside contributors, but would want to hear more on how this would be structured. SACCI anticipated greater detail following the Presidential infrastructure Summit. Greater detail on private sector participation is key to collective action.
Initiatives to tackle youth unemployment
Youth unemployment is the most pressing social issue facing South Africa, so SACCI would want to see far greater detail on government’s plans for a youth wage subsidy or a similar policy intervention.