Prof Raymond Parsons of the Potchefstroom Business School has an excellent summary and interpretation of yesterday’s Budget Speech and we are happy to re-post his press release here.
Prof Raymond Parsons
“Finance Minister Nene did a workmanlike job in his maiden Budget Speech today to manage the headwinds, tailwinds and possible whirlwinds facing the SA economy this year. He rightly cast his approach within the framework of the National Development Plan but the challenge remains to translate the proposals and intentions into changes that will make a visible difference to delivery, employment. He pressed most of the right buttons and the emphasis on small business must be welcomed.
The Minister of Finance recognised that domestic constraints were the most important ones hampering SA’s economic performance and needed to be prioritised. The question is whether the ‘mix’ in the Budget has been good enough to push the economy forward in a meaningful way. We are stuck with a 2% growth rate this year but it must not become a ‘low growth trap’. The growth prospects in 2015 still have some downside risks, stemming mainly from the uncertain energy and labour relations outlook.
Implementation remains the name of the game and it needs the full support, not only of the whole government, but also the private sector, if the NDP targets are to be reached and growth enhanced. The Medium Term Strategic Plan is now the instrument of delivery of the first five years of the NDP andnow needs to be critically interrogated. The jury is presently still out on what precise impact the Budget and its message will have on investor confidence in the medium-term.
The financing proposals for certain parastatals, and especially Eskom, remain the Achilles Heel of the 2015 Budget. The Minister of Finance agrees that uncertain electricity supply is the biggest single constraint on SA’s economic performance, but whether only injecting money into Eskom without fundamentally restructuring the organisation will remove the energy uncertainty bottleneck remains a moot point. Parastatals like Eskom need completely new business plans if they are to assure supply and win back the confidence of the business sector. Our faith in state-owned corporations should not be naive or based on cash alone, but also rooted in fundamental restructuring of the energy market.
We need to recall that the 2015 Budget is now predicated on an expected growth rate of only 2% this year, which does not leave much room for error in what would still be acceptable public debt ratios if that growth expectation were not to materialise. We are not yet quite out of the ‘public debt woods’.To meet the budget shortfall this year the Minister of Finance tax-wise in the Budget again aimed at ‘soft targets’ like high income-earners, the fuel levy and ‘sin’ taxes. It remains a basically minimalist budget at present, yet the warning signals are there.
Apart from any other considerations as to why higher job-rich growth is necessary in SA, higher growth is increasingly now needed to prevent the limited tax base itself becoming another constraint on making sensible public finance decisions in future Budgets. Eventually all roads lead back to faster economic growth.
On Friday the School and TRADE hosted the first session of our writing course for postgrads. We have experts from the School of Languages who are helping the Master’s and PhD students with those first steps in the research process.
This year we also want to use this blog to share a few resources that we have discovered on the interwebs:
- The LSE Impact of Social Sciences blog has an idea for storyboarding research. A good research question has a simple answer and good planning is half the battle. Maybe you want to think about the storyboard approach.
- Via @write4research (you should follow them on Twitter) we discovered some nice ideas for doing quicker literature reviews. This will tie in with the help that the subject librarians offer.
- On the technical-writing-skills side, here are the top-10 style checks to keep in mind: Do your paragraphs follow a ‘topic/ body/ tokens/ wrap’ structure?
- If you are very serious about the human capital, you can take this Stanford MOOC on Writing in the Sciences.
At this afternoon’s meeting of the Economists’ Coffee Club Prof Andre Duvenhage presented us with a political perspective on the State of the Nation Address 2015 (the errors and omissions in this post remain our own). He argued that it was controversial, violent and with little new content. What is interesting is what he sees as the drivers of change in South Africa.
From a liberation movement point of view, South Africa is in the second phase of transformation. The first phase was the political transformation. The second phase is supposed to be social and economic transformation. From a National Democratic Revolution perspective there are those that believe that the 1996 Constitution cannot ensure socio-economic transformation (hence all the mentions of the Freedom Charter and only one mention of the NDP).
At the same time there are all the familiar and significant economic challenges. Pro-poor spending was much easier when then economy and tax take were growing. It is more difficult to transform the pie when it is not growing.
At the same time we face institutional decay and a weakening state as is evidenced at local government level and in the parastatals. It has become impossible to talk away the service delivery protests and loadshedding. More…
At this afternoon’s (Tuesday’s the 17th’s) Economist Coffee Club meeting (13:00 in E3, room G14) Prof Andre Duvenhage will be talking about the politics of last week’s State of the Nation Address. Now, there is no shortage of views about what happened, but it might be useful to share a few thoughts about the economics before we go on to discuss the politics at the coffee club.
The Economists’ Coffee Club
A lot of things were mentioned in the SONA that have implications for the economy. The few comments that follow focus on the priorities mentioned by the President: “Our economy needs a major push forward”.
- Resolving the energy challenge
This is indeed a challenge. To see how big, have a look at Hilton Tarrant’s analysis for MoneyWeb. He makes a strong case for loadshedding everyday to the end of May to do the maintenance that is required. The costs are steep, with stage 3 loadshedding estimated to cost R80 billion per month.
- Upping the agricultural value chain.
- Beneficiation through adding value to mineral resources.
- More effective implementation of higher impact industrial policy action plan.