The business sector welcomed the budget speech, saying it was realistic and pragmatic and commended finance minister Enoch Godongwana for navigating SA’s finances towards debt stability and fiscal sustainability in the immediate future.
Presenting his maiden budget, Godongwana announced a raft of measures aimed at stimulating economic growth and providing relief to households.
These included reducing the corporate income tax rate from 28% to 27% and implementing a zero increase on the general fuel levy on petrol and diesel, which provided tax relief of R3.5bn. There will also be no increase in the Road Accident Fund levy.
Minerals Council SA said in a statement it welcomed the “realistic and pragmatic maiden annual budget speech ... which acknowledged the critical role mining plays in the SA economy”.
It said Godongwana’s commitment to reducing the fiscal deficit and stabilising debt, partially using the windfall from the mining sector’s high commodity prices, “bodes well for the discipline the country needs in managing its finances”.
“Minister Godongwana painted a very realistic picture of mining production and the negative impacts of rising input costs, electricity shortages, inadequate rail availability and regulatory uncertainty would have by moderating the mining sector’s recovery from two years of the Covid-19 pandemic,” said Minerals Council SA chief economist Henk Langenhoven.
The need for private-public partnerships in key state-owned companies such as Eskom and Transnet’s rail and port assets is critical to ensure “sustainable, inclusive economic growth and job creation”.
“The speech did not go into as much detail on restructuring as perhaps we would have liked, but clearly there is a recognition in the government that it cannot save the economy by itself,” Langenhoven said.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa) said the minister’s budget was “well balanced”. Seifsa economist Palesa Molise said the provisional allocation of R17.5bn for infrastructure catalytic projects will help accelerate industrial activities and stimulate employment creation.
North West University Business School economist Raymond Parsons said Godongwana displayed a “safe pair of hands in navigating SA’s public finances towards debt stability and fiscal sustainability in the immediate future”.
“The budget speech reflected a realistic assessment of SA’s current economic situation, identified the risks that still needed to be managed, and highlighted the importance of anchoring appropriate fiscal strategies for now.”
However, Parsons said, while the broad message of the budget speech “is positive for business and consumers”, it was not clear it represents a step-change in growth prospects for SA.
“It appears that several of the key tough policy decisions — which are badly needed for much higher job-rich growth than 1.8% — were either postponed or subjected to further delayed processes,” he said.
In some ways the budget speech seemed rather like a “holding operation”, when a little more urgency should have been injected into the decision-making. “If the economy is eventually to reach the 4%-5% growth level needed to significantly reduce unemployment, more attention must be given now to unlocking the economy’s true growth and employment potential.”
Parsons stressed that the urgency of structural reform remains “unfinished business” on the national agenda.
George Sebulela, president of the SA United Business Confederation, which consists of members representing export confederations and industry associations, said the minister was speaking in difficult circumstances. “He has tried to juggle around, to preserve and support the president’s speech during the state of the nation address.”
It is a concern that the fiscus is dependent on one industry sector for revenue generation — mining. The government needs to “walk the talk” on implementing structural reforms to unlock real economic growth. “The corporate tax reduction is very good. It will allow the private sector to create jobs,” Sebulela said.
Agri SA chief economist Kulani Siweya said the organisation welcomes the “prudent approach” taken by Godongwana. “We are however concerned about a number of announcements that will adversely affect the agricultural sector and restrict its ability to create desperately needed jobs and help drive economic growth and development,” Siweya said.
“We also welcome the R5bn contingency reserves for Land Bank, the decision not to raise the general fuel levy or the Road Accident Fund levy, as well as the corporate tax reduction”.
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