Abandoning the nuclear programme, prioritising consistency and certainty in policy, and kicking out incompetent, corrupt ministers are some of the steps Business Leadership South Africa (BLSA) says are needed to enhance business and consumer confidence.
BLSA chief executive, Bonang Mohale, on Friday said boosting consumer and business confidence could arguably add 1-2% to gross domestic product. His comments follow concerns that policy measures have heightened uncertainty.
“Mining Charter 3 is a typical example where government showed no regard for investment. It should be scrapped and renegotiated with mining companies,” said Mohale.
He said that the ANC’s national conference in December and next month’s national Budget were key to boosting confidence.
Other possible steps included fixing state-owned companies and adopting growth-inducing policies.
“There are many tough, time-consuming choices that can follow. Indeed, when our spending far exceeds our revenue, this flies against confidence-boosting measures,” said Mohale.
Mohale said that government had not done enough to address concerns about policy uncertainty in different sectors, especially in mining and renewable energy.
“In mining, the failure to finalise the Mineral and Petroleum Resources Development Act and Mining Charter are stand-out examples of avoidable causes of uncertainty. In renewable energy, we have had five successful windows of the Renewable Energy Independent Power Producer Procurement Programme, but these have not been followed through or complemented, for example, by the finalisation of regulations on subsidies for renewables or finalised policy on fracking,” he said.
He said the frequent changing of energy minister had not helped.
Last year, the Department of Energy had three ministers.
“Mining and energy are complex sectors. Add to this complication the insistence on the nuclear build programmes when Eskom is stressed and the Treasury has a funding shortfall. This affects consumers who continue to fund “bad habits” through ever-increasing tariffs and ill-timing and non-consultation on Mining Charter 3,” he said.
Major credit ratings agencies will be watching the steps that South Africa will take to set the economy on a higher growth trajectory.
In November, Moody’s placed South Africa on review for a downgrade. Moody’s said it would assess South Africa’s willingness and ability to implement growth-supportive fiscal adjustments that raised revenue and contained expenditure, structural economic reforms that eased domestic bottlenecks to growth, and improvement to the governance of state-owned companies that contained contingent liabilities.
“At the heart of Moody’s pronouncement – the basic requirements to change to a positive trajectory – is the government’s commitment to the continued independence and strong policy-making capabilities of South Africa’s policy institutions, and which enhanced medium-term growth and achieved the planned stabilisation of the government’s debt burden,” he said.
Commenting on the fiscal adjustments necessary to raise revenue and contain expenditure, Mohale said the saving over the next three fiscal years should the wage bill grow by a projected consumer price inflation of 5.5% a year instead of 7.3% was R60billion.
He said although the prospects for non-strategic assets seemed dim in the current political setting, there was an urgent need to evaluate all state assets, with a clear intention to dispose of non-strategic assets or partly divest from some.
“But growth is everything. Raising revenue is a function of improved economic performance and the increased profitability of companies. Lifting growth by 1% would add R100bn a year, a third of which would go to the fiscus.”
Mohale said there was a need for structural reform in key sectors.
“Some industries remain largely concentrated, so competition laws and enforcement are critical. This is true in a space where SAA, Transnet, Denel and Eskom operate,” he said.
Published in Sunday Tribune – KZN Business Report (14 January 2018)