Date: 25 October 2017
The Medium-Term Budget Policy Statement (MTBPS) delivered by Finance Minister Malusi Gigaba, today, is an honest reflection of the grave state of our public finances but lacks sufficient detail to bring confidence and greater certainty to the economy, Business Unity South Africa said today.
“We welcome the acknowledgement by the Minister that we cannot afford further tax increases as a mechanism to generate revenue, and the unequivocal acknowledgement that economic growth is a prerequisite to balance the budget and deliver on our social aspirations. However, there is some uncertainty from the Minister’s indication that there may nevertheless be some tax increases in the 2018 Budget. Any revenue increases should be approached with extreme caution to avoid further undermining economic growth ”, BUSA CEO Tanya Cohen said.
BUSA stated that it is of concern to business that the budget deficit has risen to 4.3% of GDP for 2017 / 2018. It is equally of concern that gross national debt will increase to 61% of GDP by 2022. “While the broad brushes of intent expressed by the Minister were promising, the clear plans and details were insufficiently articulated. This may not be enough to stave off further ratings downgrades in the near future,” stated Cohen
The R50.8 billion tax revenue shortfalls for 2017 / 2018 are of concern, and in light of the limited direction provided as to how these shortfalls will be addressed. Commenting on the nuclear build, BUSA said that the announcement that nuclear power will be procured at a pace and scale that the country can afford is cautiously welcomed for the fiscal tone it represents. BUSA reinforced that any decision and announcements around energy policy should be based on least-cost, sustainable and evidence based Integrated Resource and Energy Plans. Until such time as there had been comprehensive engagement on the IEP and IRP, any announcement regarding nuclear energy is premature and irresponsible.
Notwithstanding business’ concerns around the principle of bailing out chronically-mismanaged, poorly governed and overspending SOEs, business cautiously welcomes the indication that steps would be taken to ensure better governance and management of SOEs, together with the indication that revenue will be generated through a sale of a stake in Telkom, with a buy-back option, and that a strategic equity partner will sought for SAA. Business trusts that the selection of such SAA equity party will sit firmly within the business plan developed by the newly reconstituted board of SAA. Business is, however, disappointed that no further, bolder announcements on SOE reform and governance were made – particularly Eskom.”