CAPE TOWN - Christie Viljoen, PricewaterhouseCoopers Strategy and Economist, said on Thursday that Finance Minister Tito Mboweni's Medium-Term Budget Policy Statement had some good news in the murky details.
Viljoen said that Mboweni's statement admitted that the country’s economic structure is not conducive to high growth and job creation.
"The rand and bond yields reacted negatively to the statement. Quoting author Charles Dickens, Minister Mboweni sees the present as the best of times and the worst of times in South Africa," Viljoen said.
"A weak economy has resulted in a downward revision in revenue expectations alongside no change in spending plans. This will see a wide budget deficit for some time and a continued rise in public debt."
"However, Minister Mboweni believes that the MTBPS will play a key role in moving South Africa from the crossroads to a new future with faster and more inclusive growth," Viljoen added.
"His speech was focused around President Cyril Ramaphosa’s economic stimulus and recovery plan, and contained some good news between all of the murkiness that was a frank assessment of South Africa’s long list of challenges."
Viljoen believes that this week’s Investment Conference “will be complemented by an infrastructure fund being designed to attract private and development-finance capital to well-run public infrastructure projects that contribute to economic growth and development.
This and other comments about private sector investment acknowledged that the public sector needs private capital to develop the economy.
For the corporate sector, there was some more good news, according to Viljoen.
A large amount of outstanding VAT refunds have been cleared by the South African Revenue Service (SARS) after National Treasury stepped in to address the build-up of outstanding refunds.
The MTBPS also pledged that SARS will ensure that all future refunds are paid out within 21 working days. Small business will also soon get a financial boost with a Small Business and Innovation Fund that will help entrepreneurs navigate the pre-start-up phase, the economist said.
"Some R500 million is planned for the fund which will augment the work already being done by the chief executive Initiative’s R1.4 billion SME Fund. Furthermore, the financial sector has committed to invest R100 billion over five years in black indstrial enterprises and firms. The business community’s concerns about the planned carbon tax have been also heard by the Ministry of Finance. Pending changes to the carbon budgeting and tax systems, the date of implementation has been shifted to June 2019 from a previously planned date of January next year."
The government also appeaed to be softening its stance on private sector investment in currently close-off sectors, including low-cost housing and transport infrastructure like airports.
Regarding to cost of doing business, Minister Mboweni promised that administered prices in several sectors – including transport and energy - will be reviewed, Viljoen added.
While the country is a long way from liberalising fuel pricing and electricity distribution, the fact that reviews are taking place or will soon commence is a step in the right direction.
Cash-strapped consumers will also be happy to hear of these reviews that could eventually result in changes to local fuel and electricity prices.
Of a more immediate nature, the announcement that white bread flour, cake flour and sanitary pads will be added to the list of zero value-added tax (VAT) products will put R1.2 billion back in South Africans’ pockets each year.
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