FINANCE Minister Nhlanhla Nene said on Thursday the government would have to be realistic in its economic growth forecasts when it presents its medium-term budget in October, but it is hard to tell at this stage what revision it might make to the 2% cited in the February budget.
This week’s shock gross domestic product (GDP) figures showed that SA’s second-quarter economic growth fell way short of the market’s expectations with a contraction of 1.3%.
Most economists are revising their growth forecasts for this year downwards, in some cases to below the 2% the Treasury and the Reserve Bank have forecast.
The finance minister usually updates the government’s economic growth forecast twice a year only, in his February and October budgets. He is due to table his medium-term budget in Parliament on October 21.
Mr Nene said on Thursday the government was concerned about its ability to meet revenue targets in the light of the economic downturn, but SA’s low foreign-debt levels were helping shield government finances from a weakening rand.
The weak GDP figures, he said, presented the government with an opportunity to accelerate the implementation of the nine-point plan, drawn from the National Development Plan, which president Jacob Zuma announced in February.
Among the items on the nine-point plan is resolving the energy challenge, revitalising agriculture and more effective implementation of elements of the Industrial Policy Action Plan. Mr Nene said he had urged his Cabinet colleagues this week to act on these.
Also, the government’s recent meetings with the Big Business Working Group had pointed to areas where red tape needed to be reduced. "Some do not require changes in legislation or regulations: they just require that we do things differently," he said.
The new Central Supplier Database, which Mr Nene is scheduled to launch in East London on Monday, is expected to make it easier especially for smaller businesses wishing to register.
Mr Nene was speaking on the sidelines of a conference on urban investment, which aimed to attract the private sector to invest more in urban infrastructure, especially in the large metros that are home to more than half of SA’s population and collectively account for more than 80% of its GDP.
Treasury director-general Lungisa Fuzile told the conference that the metros needed about R43bn a year of investment to refurbish and maintain existing infrastructure as well as to expand infrastructure to support higher rates of economic growth. However, only R28bn a year on average is currently being spent.
Co-operative Governance and Traditional Affairs Minister Pravin Gordhan said the cities had to lift their game.
The recent World Bank report on doing business in SA’s largest cities had shown that there were four main types of red tape costs that were holding back investment and Mr Gordhan pointed to corruption as a factor.
"There are still too many people waiting for brown envelopes before they give approvals," he said.
The Association of Savings and Investment SA’s Adre Smit said a joint government and private sector task team had been in place since 2013 chaired by the Treasury to address blockages to investing in infrastructure.
The private sector already holds R12bn in listed municipal bonds and more than R7bn of investments in infrastructural finance for items such as affordable housing and roads.
Hilary Joffe for BDLive With Bloomberg, Reuters