South Africa’s 2018 Budget might help avert an imminent downgrade, but the reprieve would be temporary unless President Cyril Ramaphosa and his Cabinet commited to a profound change in policy direction, according to Institute for Race Relations CEO, Frans Cronje.
The “medium-term expectation for South Africa to continue underperforming regional and emerging market growth averages by around 50%” was concerning, as current growth projections “will put paid to the prospect of a medium-term employment uptick”.
Cronje added that this “reintroduces risks of political instability, and presents a horizon for the Ramaphosa honeymoon”.
The question now was whether President Cyril Ramaphosa “can translate his political ascension into an economic reformation”.
Mr Ramaphosa and his Cabinet would have to “up their game” to make a compelling case for economic growth.
The VAT increase and fiscal drag measures “will place an even heavier burden on households and consumers, depressing domestic spending, and thereby undermining any effort at economic recovery”.
“Mr Ramaphosa has done well over the past eight weeks in raising confidence about the future of South Africa. However, if he is not able to validate and reinforce that confidence with a much more compelling case for reform, it will be in vain.”
Cronje said the Ramaphosa Cabinet’s agenda must include:
* Fundamental deregulation of the labour market to boost job creation;
* Replacing race-based empowerment measures that have largely benefited a politically connected elite but failed to help the poor with a policy directed at giving the masses of disadvantaged people the skills and opportunities presently denied to them;
* Selling off underperforming parastatals; and
* Securing property rights, without which little new fixed investment could be expected.
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