#SupplementaryBudget: Structural reforms must be fast-tracked to increase transformation
BIZCOMMUNITY / 29 JUNE 2020 - 15.34 / THOLO MAKHAOLA
The South African Institute of Black Property Practitioners (SAIBPP) notes with concern the recent Supplementary Budget presented by the minister of finance, Tito Mboweni.
The minister acknowledges in his speech that the South African economy is expected to experience “the largest contraction in nearly 90 years” of 7.2% and yet the budget presented fails to explicitly outline what key measures will be implemented to drive meaningful long-term structural reform and address the key levers of stagnant growth: small business funding and support, socio-economic inequality, local procurement (private and public), digitalisation and the highly concentrated and anti-competitive structure of most key industries in the South African economy.
Tholo Makhaola, president of the South African Institute of Black Property Practitioners (SAIBPP)
We do, however, note that the minister announced that the structural economic reform document published by National Treasury in August 2019 titled “Economic transformation, inclusive growth and competitiveness: towards an economic strategy for South Africa”, which was originally published as a “discussion document”, was “adopted by cabinet last year” and is now official government policy. This comes as a surprise as no official announcement was made to this effect and statements made by Treasury in January 2020 make reference to the document as still being a discussion document. A final version of the document has also not yet been published following the hundreds of submissions made by the public. This lack of transparency on a matter as significant as economic policy is highly concerning and raises questions about the decision-making processes and political alignment within government structures.
Aggressive strategy needed to broaden tax base
The minister also asserts that “tax measures of R40bn over the next four years will be required” – this goal will not be achieved without an aggressive strategy to broaden the tax base by implementing inclusive growth and transformation in all sectors of the economy. Job creation and specifically youth employment must remain top of the agenda. Previous youth employment initiatives have thus far been unsuccessful in addressing the rising unemployment levels and this will only be exacerbated once the true impact of the Covid-19 economic shut-down is felt. Young people in our country are burdened by high data costs or lack of access to internet which severely hampers their ability to learn online, upskill and seek jobs. The slow pace of digitalisation and the high costs of data must urgently be addressed if we are to give our young people a fighting chance. The extraordinarily high debt-to-GDP levels now projected to reach 81% of GDP by the end of 2020, poses an imminent threat to our sovereignty should we find ourselves unable to service the mounting debt bill and this cannot be taken lightly. The adoption of the zero-based budgeting approach must target a reduction in areas where fiscal leakage is most rife and where funds are allocated to non-productive activities without compromising delivery of key social support programmes. This will undoubtedly pose a challenge given our current economic climate, however we await a detailed breakdown of this proposal as expected in the MTEF.
Infrastructure-led growth welcomed
SAIBPP welcomes the commitment to infrastructure-led growth which echoes the recommendation made in our “SAIBPP 10-point plan to stimulate economic growth post Covid-19” published in April 2020. Infrastructure development and maintenance is a key driver of economic growth and a significant job creator which will leave a positive legacy for generations to come. However, we must ensure that this expenditure serves to close the current socio-economic disparities that characterise the South African landscape by prioritising townships, rural areas and areas that have been previously under-resourced. Housing development should also be prioritised. SAIBPP notes with deep concern the minister’s silence on any mention of expenditure related to gender-based violence as one of the priority areas. The national lockdown has led to a surge in cases of gender-based violence and women are the primary victims. Women are significant contributors in the economy and society at large, their safety must be a priority, and the national budget must be reflective of such.
Fast-tracking economic structural reforms
In conclusion, we reiterate all the proposals made in the SAIBPP 10-point plan to economic recovery post Covid-19, which have been shared widely and publicly. We are encouraged that some of the key proposals have already been adopted such as; the reduction of the repo rate, the subsidising of the taxi industry and the reallocation of budgeted expenditure towards infrastructure development. We urge that structural reforms of the economy must be fast-tracked to increase transformation and reduce socio-economic inequalities, as well as rapid localisation of private and public procurement and the de-concentration of uncompetitive industries to drive investment in SMMEs.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER