Business Leadership South Africa (BLSA) has written an open letter to finance minister Tito Mboweni and Treasury ahead of the Medium-Term Budget Policy Statement (MTBPS) next week.
BLSA said that interests of business and Treasury largely align in wanting to see ‘the most conducive environment’ that leads to growth in output in the country.
This will lead to revenue for the fiscus that would then support government expenditure on the pressing needs in our country – in the most sustainable way, it said.
However, the group warned that concern remain around various risks – including banking sector disruptions and increases in the cost of borrowing.
“These all make investment that will create jobs difficult. Indeed, you have highlighted clearly a fiscal crisis is on the horizon without corrective action to close the hippo’s jaws,” it said.
Trim the fat
BLSA said that business backs a ‘tough budget’ which aggressively trims remaining fat, concentrated on revenue collection efficiency, with meaningful restraint on the public sector wage bill and priority given to necessary social and recovery spending.
Cuts must be in a targeted way that protects growth and government revenue, it said.
“Whilst the desire to see a ‘primary balance’ by 2023/24 sounds rather dry, business understands it is important as a step towards balancing the books and stabilising debt levels as a share of GDP.
“Equally, expenditure on the compensation budget must fall toward 10.5% of GDP from 14.2% this fiscal year. Healthcare, education and the National Prosecuting Authority must be prioritised, while poor past decisions mean substantial commitments to SOEs also have to be met – particularly Eskom.”
BLSA said that pain has to be taken on budget lines where the growth impact will be smallest. “It is important, too, to set out a roadmap toward the elimination of SOE subsidies and bailouts that is more credible than past promises,” it said.
BLSA cautioned that South Africa’s crisis cannot be micro-managed and must be unleashed with the state assembling the right foundations.
The government must understand where it does not have the capacity, let alone the funds, to drive elements of the recovery, it said.
BLSA said that there are three key areas in this regard which are interlinked:
- Government’s infrastructure push is welcome but cannot be fully centrally directed at every stage and must see a greater degree of private-led provisioning and financing of bankable projects. Our member firms, including banks and asset managers – stand ready to fund bankable and economically positive infrastructure in significant size in the coming years. Yet uneconomical and pet projects distract.
- The private sector has the capacity to rapidly solve our current and growing future energy crisis. The private sector can finance and deliver the projects rapidly and on budget for their own use embedded in their operations, or into a smart future-facing grid managed by an Independent Transmission System Market Operator either to be bought by specific buyers or for general use. Government simply needs to stand out of the way, change its mindset – and make some small amendments to regulations – and allow others to solve the problem.
- The third area is the need for business to have the freedom to find the right technical mix of skills in their businesses to make the maximum impact that will allow us to hire the largest number of South Africans. This means a liberalisation of the key skills visa list and far more efficient administration of it.
“The credibility of government’s reform and recovery plan will combine with the fiscal credibility set out in the MTBPS to lay out the train tracks from here,” the BLSA said.
“We certainly do not want a path that leads to an IMF programme, given we know it can be avoided by the right choices being made with strong leadership that sweeps away vested interests and stale thinking.
“The choices outlined in the coming week will dictate if we are on that path and those steps are being taken.”