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Budget 2022 – the country needs to be cautiously optimistic

Photographer: Nadine Hutton/Bloomberg

Photographer: Nadine Hutton/Bloomberg

Published Feb 21, 2022


THE country is awaiting Finance Minister Enoch Godongwana’s upcoming Budget Speech to hear where the i’s are dotted and the t’s are crossed, and what numbers appear on which cheques.

South Africans should be cautiously optimistic about the upcoming 2022 Budget Speech, according to Kerry Fynn, chief executive of Alpha Holdings.

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“Global ramping-up of production and supply chains in an attempt to return to pre-pandemic-levels is where the country could benefit. This has very positive tailwinds, with the potential to increase employment numbers, generate foreign revenue, bolster the current account surplus and of course, assist in the recovery of our tax revenue collection,” said Fynn.

According to Fynn, all these factors could increase economic growth due to a supportive global backdrop. China’s intention to increase monetary as well as fiscal easing to stimulate their economy also has the potential to be hugely beneficial.

Fynn said while global growth is likely to continue, it is important to note that this is off a low base, and the result is increased inflation, which concerns central banks.

However, the situation might resolve itself more quickly than expected.

“I believe that as soon as inflation moves back towards an acceptable range, the central banks will once again provide stimulus. The last thing any major economy wants to do is strangle this tenuous growth,” said Fynn.

The situation in South Africa is more complex:

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“On the one hand, we should be able to generate reasonable growth from these low-base levels. Moreover, as an exporter of commodities, we also have a lot of what the world wants right now which could boost our recovery efforts.

“On the other hand, we have sluggish gross domestic product (GDP) growth, corruption and bureaucracy, which hamper business and curtails growth. We also have a financially-pressurised consumer base that will struggle, if interest rates increase by any significant margin.”

South Africa is plagued by high unemployment and income inequality, with the highest Gini coefficient globally. This yardstick measures the gap between the incomes of a country’s richest and poorest people.

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“However, the silver lining is that within our struggles lie opportunity. In South Africa, we have a young and expanding population that is upwardly mobile; and ambitious young individuals who aspire to elevate their lifestyles. This is why most of the fastest-growing economies in the world are African,” Fynn said.