REPORTING FOR DUTY
BONANG MOHALE: Business is ready to answer Ramaphosa’s call
The past few days have renewed the hope and confidence of millions of South Africans in their country, its institutions and future.
First, our MPs elected a new president, Cyril Ramaphosa, enabling a constitutional transition from one leader to another. Then Ramaphosa opened parliament with an upbeat message that was a fitting tribute to Nelson Mandela in the year of the icon’s centenary. And this week finance minister Malusi Gigaba delivered a budget in support of the strong but achievable plans announced by Ramaphosa.
What remains is for South Africans to join hands in ensuring that these positive statements translate into action and that the younger beneficiaries of social grants are quickly turned into salary earners.
While the broad thrust of the budget is to be welcomed, we think Gigaba could have been bolder, in certain respects, to stabilise our public finances — especially by reining in expenditure, and addressing public debt and the plethora of troubled state-owned enterprises (SOEs).
As expected, and regrettably, the rate of Vat will be increased to 15%, alongside adjustments in other taxes. This will hurt the poor.
The money could have been raised through eradicating fruitless expenditure. But government’s course is indicative of the economic times we are facing thanks, in part, to a lack of investor confidence in the economy, which is still reeling from the effects of last year’s credit ratings downgrades.
We welcome the marginal reduction in the deficit. Our preference, though, would have been to address the fiscal gap through a deeper cut in spending and measures to stimulate growth to increase revenues.
The state of our SOEs remains one of the biggest threats to the integrity of our public finances
Government needs to move with speed to set up the judicial commission of inquiry into the administration and governance of the SA Revenue Service. Raising taxes in an environment in which tax morality has been compromised by governance and leadership concerns in the revenue authority is counterproductive.
Government has to be commended for the responsible manner in which it has sought to address the issue of fee-free higher education, which could have become a political football during the coming election season.
Similarly, the approval of six special economic zones is a welcome move in the attempt to take advantage of improving global economic conditions through promoting export-led growth. Government needs to urgently put in place the requisite incentives.
The state of our SOEs remains one of the biggest threats to the integrity of our public finances. Of major concern is the heavy reliance of some of these entities on government guarantees to stay afloat, instead of using the guarantees to fund capital expenditure.
The task of addressing the leadership, capital structures and governance of these entities cannot be delayed. The work that government has commenced with Eskom — where a new, credible leadership is now in place — needs to be replicated across all the major SOEs.
It’s concerning that government will be injecting more cash into some of these entities. Hopefully, financial support will only be considered for those SOEs that support public policy objectives or have social mandates. Caution is required in funding those that have a commercial mandate.
As we approach another period of ratings reviews, it would be helpful if government were to clarify how it plans to address the problems in the SOE sector — especially in the major entities.
The core message of the budget is hopeful. Still, achieving the aspirations envisaged in it will require a lot of hard work on all of our parts.
Business is ready to answer Ramaphosa’s call — thuma mina (send me) — to do its part in ensuring that our economy is pulled back from the brink of policy own goals.
In this respect, Business Leadership SA has been working with other stakeholders on a set of short-to medium-term measures to get our economy on a growth path again. In due course, we will share our proposals with government.
• Mohale is CEO of Business Leadership SA