JOHANNESBURG - Exports have to come to the country’s rescue, in the face of persistent slow economic growth and government’s small room to manoeuvre on the domestic front.
When Finance Minister Malusi Gigaba presents his first budget speech this week, he will have to reckon with managing debt and tax levels. He has little in his armory in the Medium-Term Budget Policy Statement (MTBPS) to spur the economy, set to grow at only half a percent this year, or boost business confidence, at its weakest in 30 years according to the South African Chamber of Commerce and Industry’s index in August 2017.
Earlier this year the Industrial Development Corporation (IDC) advised that “the South African economy will most likely have to rely on exports for a positive performance”. Signs of an export boost are encouraging. Demand in the markets of our key trading partners is looking up.
For example, the European Union (EU) – our biggest trading partner as a region – is expected to achieve ‘above-potential’ growth levels this year and in coming years on the back of much stronger performance in the first part of 2017. The IDC predicts that economic activity will continue to expand in the US, Eurozone and China at least over the shorter term. A relatively competitive exchange rate helps.
Firms which can take advantage of global market opportunities will be in a stronger position to weather the challenges in the domestic market in South Africa. These firms can continue to employ people and contribute to the broader economy through linkages with other firms, payment of taxes and consumption of infrastructure services at ports etc. Exporters engaged with developed country markets have been shown to have high levels of productivity, produce high-quality products, employ highly skilled workers and pay high wages. South Africa needs to encourage these kinds of firms to contribute during grey days for the economy as a whole.