#Budget2019: The real investor friendly budget
To support President Ramaphosa’s drive to attract a $100 bn investment to South Africa, the budget must aim to support this drive.
A hypothetical budget to attract these investments must be as follows:
- Announce a plan to privatize Eskom and SAA within the next five years. In the short run, bail them out.
- Rationalize the state departments, announce a comprehensive plan to make the government lean and mean in the next five years, decrease the number of state departments and deputy ministers and introduce strict procedures to combat unauthorized expenditures, these unauthorized expenditures, amounting to at least R60 bn is enough to finalize the no fees student policy as well as the introduction of a social security and health system.
- Revamp Sars – make it again a lean and mean institution that it was 10 years ago
- These plans should contribute towards the announcement that the budget deficit before loans will decrease from 4.3 percent to lower than 4 percent in the first year and to less than 3 percent in the next 5 years. This will also mean that total government debt to GDP should decrease to less than 60 percent this year and lower than 40 percent in five years. The reason is that if the above plans attract more FDI (it may not be a $100bn) but the South African economy would probably grow at levels higher than 2.5 percent per annum over the next five years. This will ensure higher tax income and lower debt.
- Announce a comprehensive plan to create sustainable jobs. Announce that all new businesses created in townships and rural areas with an output of less than R10million will be exempted from company and value added tax. The licensing process must be very simply with no cost; these companies should be registered at no cost.
- Introduce a comprehensive plan to revitalise education – provide the necessary infrastructure and manage it properly. Train teachers properly and bring back occupational schools.
- Announce a comprehensive plan to counter act the current corrupted tender system.
It doesn’t matter who is the ruling party – if they do not adhere to this hypothetical budget, South Africa will be down-rated to junk status, foreign direct investment and portfolio capital will flow out of the country, the economy will grow less than 1 percent over the next five years and the unemployment rate will accelerate.
It is like a cancer patient diagnosed with cancer but not terminal as yet. If the patient doesn’t receive the right treatment, he or she will die.
I still belief there exist the potential amongst politicians, business and labor to treat the patient.
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