BUSA: Godongwana needs to ensure funds are spent efficiently
Business Unity South Africa CEO Cas Coovadia says Finance Minister Enoch Godongwana needs to outline clear measures to ensure available funds are spent efficiently and to curtail expenditure in the country when he tables in his medium-term budget.
Godongwana will deliver the much-anticipated Medium-Term Budget Policy Statement in the National Assembly on Wednesday.
This comes as the minister had warned that South Africa will run out of money by March 2024 unless it reduces its spending.
As of June 2023, South Africa’s debt to GDP ratio was 72,7%, up from 70,9% in the previous quarter.
Coovadia says the country has a growing tax revenue shortfall, in part because of weak household finances, low business confidence, low investment, lower global commodity prices, and a weak rand.
"Consequently, BUSA recommends the following for the MTBPS: Curtailing expenditure: The Minister needs to outline clear measures to ensure available funds are spent efficiently and to curtail expenditure, which has to include deep and substantial cuts in spending on non-essential and non-productive programmes, the shelving of unfunded prestige projects and linking future public sector wage increases to inflation.
"These measures must have the support of the rest of the Cabinet, which must speak with one voice to boost public confidence in the government’s commitment to responsible management of the economy.
"Raising debt to fund growth-enhancing expenditure: The minister has no choice but to raise more debt as a stop-gap measure to fund capital investment in growth-enhancing economic infrastructure. However, the increase in debt must be kept to a minimum and be complemented by vital economic reforms that will encourage and facilitate private-sector investment."
He adds that increasing any taxes will burden households and hobble economic growth further as the country's tax-t-GDP ratio is amongst the highest in the world.
"The most effective way to generate fiscal resources is to support economic growth. South African businesses are working with the government to resolve the crisis in energy, ease the bottlenecks in logistics, and fight crime and corruption. Businesses’ commitment to the country is clear.
"However, South Africa needs leadership with the political will to provide a clear policy environment, a commitment to removing barriers to investment, and to building business, investor, and consumer confidence.
"Economic growth is the national imperative if South Africa is to avoid a fiscal crisis, create jobs, deepen the tax base, and provide sustainable support to its most vulnerable."
ALSO READ
