By Prof. Busisiwe Mavuso
•This is the first budget from the government of national unity and will be a test of its ability to set coherent spending priorities that put the country ahead of party politics.
•Setting a positive direction for the budget, last week National Treasury issued new regulations governing public-private partnerships which allow government to partner with private investors to jointly fund, build, operate and maintain public infrastructure.
•As organised business, the relationship with the US is top of mind, with jobs and the economy at the centre of our concerns. We are working toward an approach that aims to protect the interests of companies in both countries.
The budget this week is a major milestone in all our efforts to achieve 3% growth by the end of this year. Government must ensure it lives within its means, focusing spending on growth-enhancing activities and investment. This is the first budget from the government of national unity and will be a test of its ability to set coherent spending priorities that put the country ahead of party politics. It must prioritise the creation of sustainable jobs and support an environment that will drive private sector investment.
As we have learnt to our cost, if investors are worried about government’s ability to meet its financial obligations over the long term, they do not put their own money at risk. That is why the finance minister on Wednesday will need to demonstrate that government can fund its spending plans and do so without dragging down the economy through tax increases.
Setting a positive direction for the budget, last week National Treasury issued new regulations governing public-private partnerships. These arrangements allow government to partner with private investors to jointly fund, build, operate and maintain public infrastructure. The new regulations are positive for our efforts to turn South Africa into a building site, enabling private investment to flow into new projects.
The regulations have been long in the making and will make it easier for the private sector to take the initiative on new PPPs and smooth the regulatory path especially for smaller PPPs. The new regulations set down a mechanism for unsolicited PPPs, which enables the private sector to innovate and develop new concepts to help the public sector achieve its objectives.
The budget has the potential to further this theme with more detail on infrastructure plans particularly through state-owned enterprises where the private sector can also partner to improve delivery.
The budget comes at a time when foreign policy has become a critical front to the outlook for our economy and jobs. The world is coming to terms with the new Trump administration and its wide-ranging changes to how America engages with the world. South Africa has been singled out by the administration, and we must ensure we respond with cool heads. On the whole, we have benefitted this year from very good relations with international counterparts, stimulated by our chairing of the G20. Many global leaders will be visiting our shores, giving us ample opportunity to demonstrate how we are a country open to business in which the rule of law is completely reliable.
Trade plays a vital role in our ambitions to grow the economy and create jobs. The United States is an important trading partner, importing our platinum and other minerals as well as manufactured goods like vehicles and machinery. The trade balance favours South Africa and supports many jobs especially through high value-added manufactured goods. Our respective private sectors have close relationships with over 600 American companies active here. Our businesses work under the rule of law within constitutional democracies, and there is much we can achieve by working together, which is why trade flows have been on an upward trend for several years.
Tariffs will put those relationships under strain, as we will see with the steel and aluminium tariffs that have already been imposed. Steel and aluminium account for about 8.5% of what we export to the United States, so the 25% tariff will put pressure on those volumes, though they account for 0.3% of all our exports.
As organised business, the relationship with the US is top of mind, with jobs and the economy at the centre of our concerns. We are working toward an approach that aims to protect the interests of companies in both countries. But we must also keep our wider international relations in perspective, including many fast-growing markets that provide opportunities for our businesses.
For the budget, the focus must remain on our domestic ambitions. It will need to set a clear path for debt levels, credibly showing how they can be reduced. That is key to continuing the improving confidence of ratings agencies. Ratings upgrades are positive for the whole economy, reducing the cost of debt not just for government but all businesses.
Spending must be efficient and directed toward priority areas that can support the economy. Infrastructure and education are examples where government enables economic activity and I hope we see a clear approach to improving both. Treasury will need to set out how it plans to deal with the financial challenges facing Transnet and Eskom. Eskom still needs to fix its debt-burdened balance sheet, which is substantially compromised by municipalities that continue to grow their arrears. Transnet must invest in infrastructure, though much can be done with accelerated deals with the private sector, especially through concessions, saving the public purse. Other perennially failing SOEs like the Post Office and Denel are not worth more public bailouts.
I am optimistic that the budget will support our efforts to prioritise growth and advance the ability of business to invest. We have had a very strong start to the year, with much improved electricity reliability and a generally warm global environment. We must proactively manage our relationship with the US under the new administration, but our wider mission remains clear. We must build our economy, stimulate investment and create jobs. We are on that path and this week can accelerate the journey.
