The government recognised that a major reason for the low level of investment in the economy was weak business confidence, driven partly by perceptions of policy uncertainty, Deputy President Cyril Ramaphosa said yesterday.
There should be no grounds for such uncertainty as the new administration had entered into office with a clear and emphatic mandate to implement the National Development Plan (NDP), he said.
Speaking at the Reserve Bank Leadership Conference, he said the key elements of the plan were captured in the medium-term strategic framework (MTSF), and all institutions of state had gone to work to achieve its objectives.
“Government will increase its engagement with business to ensure that business better understands the policies of this administration. For our part, we hope to better understand what is required to unlock investment and ensure that we work together to build investor confidence,” Ramaphosa said.
He said banks would be encouraged to broaden access to financial services to enable people to build up their assets and to help small businesses to emerge and grow.
Alluding to African Bank’s failure, Ramaphosa said measures would be introduced to address poor lending practices and excessive charges in some parts of the financial sector, and make financial services more inclusive and accessible.
“Government will continue to strengthen the regulation of financial institutions to ensure that savings are protected and customers are treated fairly.”
He said the Post Office’s Postbank, which has applied for a banking licence, would play an expanded role.
Ramaphosa said the government wished to commend the Reserve Bank for its handling of the situation at African Bank. “The Reserve Bank’s intervention contained any potential repercussions that the failure of African Bank could have had on the broader financial system. Retail depositors have been protected and corporate investors have certainty about their risks and returns.”
He said the government was hopeful that the bulk of the business of African Bank would survive and its 3.2 million clients would continue to be served in the future.
He said the MTSF called on the government to take steps to improve the stability of the exchange rate at a competitive level, accompanied by measures to reduce the impact of currency volatility on the productive sectors.
“In particular, we commit government to raise the level of foreign exchange reserves in a prudent manner. This requires clear co-ordination between fiscal and monetary policy.”
Ramaphosa said the government would continue to pursue a counter-cyclical fiscal policy where the state saved in good times and spent to stabilise the economy during downturns. “We seek a fiscal policy that gradually shifts spending from consumption towards investment.”
He said the key challenges to economic growth were domestic.Supply-side disruptions have plagued the economy over the past couple of years, weakening confidence and reducing the level of investment and household consumption.
He said: “Concerns about the reliability of electricity supply, strike action, infrastructure blockages and poor service delivery all negatively impact on economic growth and job creation. These are exacerbated by longer term structural issues, such as low skills levels, widespread poverty and spatial segregation.”
Through the NDP, the government sought an economy with higher employment, better export competitiveness and more equitable sharing of the fruits of progress.