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Investors urge the Finance Minister to prioritise growth and provide clarity on structural reforms

Investors on Friday urged Finance Minister Enoch Godongwana to prioritise economic growth and provide clarity on structural reforms when he tables his maiden Budget Speech on Wednesday. Photo: Phando Jikelo/African News Agency(ANA)

Investors on Friday urged Finance Minister Enoch Godongwana to prioritise economic growth and provide clarity on structural reforms when he tables his maiden Budget Speech on Wednesday. Photo: Phando Jikelo/African News Agency(ANA)

Published Feb 21, 2022

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Investors on Friday urged Finance Minister Enoch Godongwana to prioritise economic growth and provide clarity on structural reforms when he tables his maiden Budget Speech on Wednesday.

This Budget comes when the severe real-time impact of the Covid-19 pandemic on economic activity has largely diminished, but poverty and unemployment have deepened.

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Economic growth is projected to rise between 1.7 percent and 2.2 percent this year, but the end of the National State of Disaster and all Covid-19 lockdown restrictions could boost activity.

In his State of the Nation Address (Sona), President Cyril Ramaphosa emphasised that the government was accelerating critical structural reforms, a positive for medium-term economic and employment growth.

Wealth manager Citadel's chief economist Maarten Ackerman said last week Godongwana should prioritise policies that grow the economy, stimulate foreign direct investment, and ease fiscal challenges.

Ackerman said Godongwana must use this opportunity to show the world that South Africa was serious about getting its spiralling debt and unemployment under control.

“One can't really fault Ramaphosa's economic policies, but what we need to see now is proper implementation to kickstart economic growth of at least 3 percent. It all boils down to fixing economic growth,” he said.

“The South African economy can't rely solely on the reopening of the global economy and SA's strong commodity and agricultural exports as these are never guaranteed long-term. We need a strong economic foundation.”

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South Africa's budget deficit is projected at -5.9 percent of the gross domestic product (GDP), very close to the projection made during the medium-term budget policy statement (MTBPS) in November.

Investec economist Lara Hodes said the Budget Review was expected to see fiscal consolidation forecasts largely unchanged from November's MTBPS.

Hodes, however, said the deficits outcome for the past fiscal year should see a much more significant revision towards -6.0 percent of GDP on revenue overruns.

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“The modestly lower deficit and debt projections are supported by the anticipated quicker pace of economic growth and somewhat higher revenue collections aiding underlying debt sustainability and so servicing costs,” Hodes said.

Economists have forecast that the buoyant commodity prices will result in a revenue overrun of between R120bn and R200bn.

Allan Gray fund manager Thalia Petousis said Godongwana was likely to strike an optimistic chord thanks to a number of recent tailwinds responsible for positive economic uptick.

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Some economists have called for the government to aim for a 5 percent economic growth rate to deal with unemployment, poverty and inequality.

The FNB economics team led by Mamello Matikinca-Ngwenya said the Budget should demonstrate a continued commitment to the current fiscal consolidation path while emphasising progress on growth-enhancing reforms and related infrastructure plans.

“We believe that long-term economic growth could be higher if economic reforms and infrastructure investment are accelerated,” FNB said.

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