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Business Leadership South Africa (BLSA) has written an open letter to Finance Minister Tito Mboweni and Treasury ahead of the Medium Term Budget Policy Statement (MTBPS) next week.
BLSA said that the interests of companies and the Treasury are largely aligned in the desire to see “the most conducive environment” that leads to the growth of production in the country.
This will lead to revenues for the fiscus that would then support government spending on the urgent needs of our country, in the most sustainable way, he said.
However, the group cautioned that concerns remain about various risks, including disruptions to the banking sector and increases in the cost of borrowing.
“All of this hinders the investment that will create jobs. In fact, they have clearly highlighted that there is a fiscal crisis on the horizon without corrective action to close the hippo’s jaws, ”he said.
Trim the fat
BLSA said companies support a ‘tight budget’ that aggressively cuts the remaining fat, focused on revenue collection efficiency, significantly restricting the public sector wage bill, and prioritizing necessary recovery and social spending.
The cuts must be in a specific way that protects growth and government revenue, he said.
“While the desire to see a ‘primary balance’ by 2023/24 sounds rather dry, companies understand that it is important as a step towards balancing the books and stabilizing debt levels as a percentage of GDP.
“Likewise, spending in the compensation budget should fall to 10.5% of GDP from 14.2% this fiscal year. Health care, education and the National Prosecutor’s Office must be prioritized, while bad past decisions mean that substantial commitments must also be met with state-owned companies, particularly Eskom. “
BLSA said to take into account budget lines where the impact of growth will be minimal. “It is also important to establish a roadmap towards the elimination of subsidies and bailouts of SOEs that is more credible than previous promises,” he said.
Recovery
The BLSA cautioned that the South African crisis cannot be micromanaged and must be triggered with the state assembling the proper foundations.
The government must understand where it does not have the capacity, much less the funds, to drive elements of the recovery, he said.
BLSA said there are three key areas in this regard that are interrelated:
- The government’s infrastructure push is welcome, but it cannot be centrally directed at every stage and must see a greater degree of provisioning and financing of bankable projects by the private sector. Our member firms, including banks and asset managers, stand ready to finance profitable and economically positive infrastructure of significant size in the years to come. However, wasteful and pet projects are distracting.
- The private sector has the ability to quickly resolve our current and growing future energy crisis. The private sector can finance and deliver projects quickly and on budget for its own use integrated into its operations, or in a forward-looking smart grid managed by an Independent Transmission Systems Market Operator, either to be purchased by specific buyers or for general use. The government simply needs to get out of the way, change its mind, and make some small amendments to the regulations, and allow others to solve the problem.
- The third area is the need for companies to have the freedom to find the right mix of technical skills in their businesses to achieve the maximum impact that allows us to hire the largest number of South Africans. This means a liberalization of the list of key skills visas and a much more efficient administration of it.
“The credibility of the government’s reform and recovery plan will be combined with the fiscal credibility established in the MTBPS to trace the train tracks from here,” the BLSA said.
“We certainly do not want a path that leads to an IMF program, since we know that it can be avoided if the right decisions are made with strong leadership that eliminates vested interests and stale thinking.
“The options outlined in the next week will determine if we are on that path and if those steps are being taken.”
Read: Nedbank on South Africa’s Real Job Losses and How Long It Will Take to Recover
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