Pretoria - Finance Minister Pravin Gordhan says, despite lacklustre economic growth, positive indicators are emerging that indicate there is an opportunity for a new growth cycle.
In documents tabled on Wednesday to coincide with his Medium-Term Budget Policy Statement, the minister said factors such as additional sources of electricity being connected to the grid would help boost economic growth.
SA's gross domestic product is only expected to grow at 0.5 percent this year, down from a previously-anticipated 0.9 percent. Growth is projected to reach 2.2 percent in 2019.
In addition, says Gordhan, agriculture is expected to recover as the drought comes to an end, while exports and tourist receipts are once again growing. "A real, sustained depreciation in the exchange rate has created opportunities for export growth."
The rand has been trading at around R14 to the dollar for the past while, a figure many economists say doesn't reflect is par value with a major trading currency.
New investment plans
Gordhan also noted that inflation has moderated, and is now expected to hover at around 6 percent over the next while.
"The green shoots of an economic recovery are reflected in new investment plans."
However, says Gordhan, these positive indicators have yet to filter through to revenue collection and SA's fiscal limits have been reached. As a result, government will continue to tighten belts, and more revenue needs to be collected through tax.
Gordhan says, to grow faster, the economy needs higher levels of private investment.
South Africa's potential growth rate - the fastest the economy can sustain without increasing inflation - has fallen from about 4 per cent to below 2 per cent since 2012, says Gordhan.
The main limitations to faster growth are within the domestic market and include infrastructure bottlenecks, low levels of competition in certain markets, a volatile labour relations environment, regulatory constraints and red tape, inefficiencies in state-owned enterprises, and uncertainties in the policy environment.
"By limiting the economy's potential to grow more rapidly, these constraints effectively block economic transformation."
As a result, government's focus is on implementing the 9-point plan announced last February, which it hopes will bolster growth to reach the targets set out in the National Development Plan, which aims to drastically reduce unemployment and poverty.
Among government's interventions are to address issues with the Mineral and Petroleum Resources Development Amendment Bill, immigration reforms to speed up visa processing, improve certainty over the national broadband rollout, reduce legislative and regulatory duplication and foster better labour relations. All these interventions also fall under the ambit of building a cohesive society in which everyone works together.
IOL