Devastating economic growth projection
- Dr Kenneth Creamer
If South Africa sticks to Minister Gordhan’s budget it is most likely that the country will avoid being further down-grade.
Minister Pravin Gordhan’s budget speech had a serious, back-to-basics, tone. He reminded us that South Africa is a strong and resilient nation, but that our economy is performing very poorly. The budget shows a determination by government to dish out tough medicine including spending caps, reduced borrowing and increased taxes.
If South Africa sticks to Minister Gordhan’s budget it is most likely that the country will avoid being further down-graded by the credit ratings agencies. This is because the budget clearly signals government’s intention to quicken the pace at which the country will sort out its budget imbalances.
It is important that Minister Gordhan has re-emphasised the need to scale-up private and public investment growth in the economy, as this is the key to job creation and inclusive growth. In addition to this longer-run issue, Minister Gordhan has not lost sight of some of the most pressing issues in South Africa today, such as, drought relief, basic education funding, and the resourcing of higher education, including the clearing of student debt.
It is disappointing that Minister Gordhan projects that South Africa’s economy will only grow by 0.9% this year. This very low economic growth rate, below the population growth rate, is devastating as it will result in falling GDP per capita in South Africa in the year ahead.
Low growth, is partly due to adverse international conditions, but it is imperative that South Africans work together to remove domestic impediments to growth. Own goals, such as, poorly performing state companies, service delivery failures, timidity in investment plans and anti-competitive conduct by companies, need to be eradicated in order to lift economic growth to the level needed to improve the lives of the majority of our people.
Dr Kenneth Creamer is an economist at the School of Economic and Business Sciences, Wits University. He is available at firstname.lastname@example.org