It’s unfortunate that the finance minister’s post doesn’t come with conjuring powers, because working as he is with one hand tied behind his back, it would have taken a magic wand for Gordhan to have been able to present anything other than a dismal economic outlook in his mini budget speech.
We cannot create investor confidence without, among other things, energy security, and cash-strapped South Africans can ill afford the greater tax burden they’ll be facing next year. It certainly does not bode well for growth in the national property sector, which is currently being shored up by the Western Cape. If that market slows, driven by further shrinkage of consumer spending, property inflation will start to move into negative territory in the medium term.
South Africa needs to see a drastic streamlining of the very bloated public sector and sharp cuts in superfluous government spending before a greater burden is passed onto what is actually a very small tax-paying base compared to the overall population of the country. A medium-term economic turnaround isn’t possible until that happens.” – Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty
Key take-outs from the Medium-term Budget Speech today
- Global growth has slowed, affecting investment and trade in many developing economies.
- Our economic growth will be just 0.5% this year, rising to 1.7% in 2017. If we do the right things to support investment and confidence, our economic recovery will be more rapid.
- Measured and balanced fiscal consolidation will continue over the period ahead, with the budget deficit declining from 3.4% this year to 2.5% in 2019/20.
- Debt is projected to stabilise at just less than 48% of GDP.
- Over the next two years, we propose to raise an additional R43bn through tax measures.
- The expenditure ceiling will be lowered by R26bn.
- Consolidated government expenditure will rise by 7.6% a year over the Medium-Term Expenditure Framework period. Additional allocations are proposed for post-school education, health services and social protection.
- Infrastructure investment, mainly in energy, transport and telecommunications, will amount to over R900bn over the next three years.
- Efforts to improve supply chain management and ensure greater value for money in public service delivery will continue to be prioritised.