Masondo warns of crisis over slow pace of economic reforms

Deputy finance minister David Masondo says the slow pace of implementing structural economic reforms is worrying and warned that SA faces a “credibility crisis” if it does not accelerate.

Critics have highlighted the long time it is taking government to implement the much talked about economic reforms, which are also required by the IMF as a condition of its R70bn loan to SA.

These reforms are critical if SA is to ratchet up its economic growth rate — Treasury has forecast a 7,2% contraction this year.

The government has been discussing economic reforms with its social partners in Nedlac and the role of each in promoting economic growth and the institutional framework for this.

Masondo was answering questions in the National Assembly on Wednesday on behalf of finance minister Tito Mboweni during a question-and-answer session between MPs and ministers in the economic cluster.

It has been almost a year since the Treasury released its economic reform document, titled “Economic transformation, inclusive growth and competitiveness: Towards an economic strategy in SA”, and several months since the government released its post-Covid economic recovery plan.

“We are trying our best to make sure that we move with speed (to implement reforms) as time is not on our side,” Masondo told MPs.

Among the reasons for the lack of movement in reforms was vested interests in certain industries such as electricity and a lack of capacity within the government, he said.

Supply side constraints such as electricity, logistics and telecommunications had been identified.

But Masondo noted that various departments were implementing reforms identified in the Treasury paper in the areas of electricity, telecommunications and water.

The deputy minister said the cabinet would be receiving regular reports on the constraints to economic growth.

He said the Treasury had developed various options for the establishment of a state bank in line with a resolution taken by the ruling ANC. These options would be presented soon for the cabinet to consider which one was viable and fiscally sustainable.

Questioned by DA finance spokesperson Geordin Hill-Lewis on whether the government’s aim to achieve a primary balance by 2023/2024 in terms of its fiscal consolidation plan was a firm commitment by the cabinet or simply a target, Masondo said it was a target.

“It is going to be very difficult for anyone, not just government, to say that definitely this target is going to be achieved,” Masondo said.

The government would do everything it could from its side to achieve this target in terms of cutting expenditure but it would also depend on economic growth and revenue collection.

The government has projected spending cuts of R250bn over the next two years beginning in 2021/2022.

Masondo said there would be no “holy cows” in terms of the spending cuts; no spending items would be automatically protected from possible adjustments.

Work was under way towards achieving fiscal consolidation and debt reduction.

ensorl@businesslive.co.za