By Lehlohonolo Lehana.
Finance minister Enoch Godongwana says South Africa needs to urgently improve its business and service delivery conditions, or risk losing significant business investments.
This entails reducing regulatory constraints, providing effective services, as well as coordinating and sequencing economic interventions, Godongwana said in an oral response to questions in parliament on Wednesday (9 March).
He added that cities and provinces have an important role to play in creating an enabling environment for investment.
“In the City of Tshwane, for example, we are at risk of losing a potential multi-billion-rand investment by Ford in an electric vehicle plant.
“Ford has already invested R16 billion in the Tshwane Automotive Special Economic Zone where it is producing its Ford Ranger model. This is the largest foreign direct investment project our country has seen in recent times and has already created around 8,000 jobs.”
Ford intended to invest further in bringing its electric vehicle production to South Africa. This, however, has been put at risk because the City of Tshwane has been unable and perhaps unwilling to secure the electricity the new plant needs, Godongwana said.
“The Tshwane example reminds us that a deficit of political will at municipal level makes it massively harder than it should be to create conditions for job-rich growth.”
Godongwana added that government must continue with its reform agenda – in energy, telecommunications, rail, ports water and sanitation, as well as in boosting tourism and attracting rare skills into the economy.
“We must act with speed to accelerate the pace of inclusive economic growth and job creation. This must shape all our macro and microeconomic policies and interventions.
“It is only through sustained economic growth that South Africa will be able to significantly reduce unemployment, poverty and inequality, “he said.
Public sector wage bill
As part of addressing the public sector wage bill, a Public Sector Labour Summit is scheduled to take place at the end of this month.
The summit is an important opportunity for all stakeholders to engage honestly and transparently and chart a path towards a more sustainable public service and remuneration guidelines.
The Minister said much has been made of the $750 million loan that government took from the World Bank.
“The World Bank loan has no conditionalities attached. It does not in any way threaten the sovereignty of our country. We considered all forms of concessional and non-concessional funding necessary to address the shortfall between our revenue and our expenditure. We then chose an affordable option available to us,” the Minister said.
In this year’s State of the Nation Address, the President announced the extension of the Social Relief of Distress grant to March 2023.
“The President further indicated that in this period, detailed technical work and engagements will take place to identify the best options to replace this grant. In this regard, work is underway to review the grants system, with a view to developing an optimal support mechanism for grants recipients.
Russia’s invasion of Ukraine
The rising oil price, the potential weakening of the rand against the United States dollar, and supply constraints around wheat, pose upside risks to food and headline inflation.
This is according Godongwana who noted that the conflict between Russia and Ukraine carries with it significant risks for a world economy that is yet to fully recover from the shock of the Coivd-19 pandemic.
“The longer the conflict lasts as well as the imposition of further sanctions could lead to widespread global inflation and impede global economic recovery,” Godongwana said.
He made these remarks in Parliament during the debate on the 2022 Fiscal Framework and Revenue Proposals.
“On the positive side, we expect that the rally in export commodity prices, stemming from supply concerns brought about by the conflict, will provide added support to the local mining sector and a possible windfall to revenue collections,” the Minister said.
The recently released Gross Domestic Product (GDP) for the fourth quarter of 2021 by Statistics South Africa shows that the economy grew by 1.2 percent, after shrinking by 1.7 percent in the third quarter of 2021.
“This is 0.2% lower than the Treasury estimations. Overall, South Africa’s economy grew by 4.9 percent last year, compared to the COVID-19 driven contraction of 6.4 percent in 2020. This represents a slightly better growth than estimated by National Treasury.
“There were improvements in a number of sectors namely: agriculture, manufacturing, services and transport. Of concern are declines in mining production, construction, electricity, government and financial services,” the Minister said.
He called for the acceleration of the pace of inclusive economic growth and job creation.
“This must shape all our macro and microeconomic policies and interventions. It is only through a sustained economic growth that South Africa will be able to significantly reduce unemployment, poverty and inequality.
“As outlined in the Economic Reconstruction and Recovery Plan, and emphasised in the State of the Nation Address as well as the Budget Speech, we must act urgently to deepen social compacting and broaden consensus around what needs to be done to pull our economy out of its poor state,” the Minister said.
In this regard, work has begun to finalise a series of social compacts with various social partners.
“Efforts to grow our economy will not only depend on macro-economic interventions. We must continue with our reform agenda – in energy, telecommunications, rail, ports water and sanitation, as well as in boosting tourism and attracting rare skills into our economy.
“We are encouraged that the spectrum auction began yesterday, and will be complete by the end of this month. This will support lowering the cost of data; improving broadband coverage including in rural areas; increasing broadband speeds; and the rollout of 5G,” he said.