The MTBPS may be called a ‘mini- budget’ but it carried a major message: SA is in a low growth trap and until this changes, the government will have ‘to cut its coat according to its cloth’. Growth rates of 1.5% are simply too inadequate to sustain the socio-economic demands made upon them, as the widespread protests about university fees again confirm. The NDP interim growth target of 5% by 2019 is now well beyond reach. The MTPBS may have outlined the economic challenges facing SA realistically but message may not have been bold enough to meet them.
Although all roads to a better economic performance, employment and increased tax revenues lead through a much higher growth rates, this will now depend heavily on the actions of other Cabinet Ministers, and not just on the National Treasury. Decisions on issues like the investment bill, visa requirements and land reform undermine the policy coherence which Finance Minister Nene pleaded for in the MTBPS. Minister Nene cannot guarantee the future performance of his Cabinet colleagues, but this coordination in policy remains imperative.
Although on the face of it the MTBPS projects government spending limits and debt ratios which may hold the credit rating agencies at bay for awhile longer, SA’s public finances are not yet out of the woods. The economy as a whole remains fragile given external and internal pressures, which keeps the projections in the MTBPS vulnerable. The dangers of a debt trap or higher taxes still exist. Only a collective commitment to urgently and visibly implement the overall National Development Plan in a coherent and coordinated way will build the necessary confidence to create a bigger, stronger and better economy.
Prof Raymond Parsons of North West University Business School