Tag: Budget

• Lacks reforms to turn the tide on low economic growth
• Government debt remains high, State finances continue to deteriorate
• Public sector wage bill remains largely unchecked
• SOEs continue to drain fiscus

 

Business Unity South Africa (BUSA) is disappointed at the lack of bold steps in Finance Minister Tito Mboweni’s Budget to contain Government debt and ensure South Africa retains its remaining investment-grade sovereign credit rating.

 

While we appreciate that Minister Mboweni delivered his maiden Budget speech amid weak economic growth, a low investment climate and high inequality, we believe he has failed to address the fundamental challenges facing South Africans and the economy.

 

In particular, the Budget speech has not introduced the much-needed and far-reaching reforms necessary to turn the tide on the low economic growth trend, arrest the State’s deteriorating finances and high debt, confront the governance and financial challenges besetting state-owned entities (SOEs), and to decisively address the root causes of the rising public sector wage bill.

 

While Minister Mboweni is to be commended for presenting a realistic assessment of the country’s challenges, the Budget came up short on concrete steps that need to be taken to lift the South African economy from its current prolonged slump and radically improve the investment climate.

 

The economy is projected to have grown by less than 1% in 2018, and the growth estimates for the medium term remain low relative to the country’s ambitions to get the economy going. This is further compounded by a weakening global economic growth rate. In addition, the Budget speech has not gone far enough to alleviate policy uncertainty, which is the primary factor cited for the country’s low investment rate.

 

The State continues to walk on a shaky tightrope with reference to revenue and expenditure, and its debt-servicing costs. A projected debt rate ratio of 60% to GDP is not only unsustainable, but also threatens to undermine Government social spending.

 

In reference to SOEs, BUSA considers the power utility the greatest risk to the economy, and its ongoing operational, structural and debt challenges require resolute and urgent action. BUSA notes the R23bn-a-year allocation to Eskom in the absence of a comprehensive, aligned position between the power utility and its stakeholders on how to effect a restructuring. BUSA welcomes the announcement that Cabinet will take steps to ensure that the State no longer advances guarantees to SEOs for operational purposes. However, there are no proposed modalities on what form, shape or function SOEs will take to offload their pressure on State finances.

 

BUSA is also disappointed at the lack of appropriate acknowledgement of the risks posed by land expropriation without compensation and, by extension, the protection of property rights, with reference to investment. The Budget also failed to reinforce the independence of the Reserve Bank and signal support for inflation targeting.

 

BUSA notes the announcements with reference to bolstering SARS and ensuring that the tax authority is well-capacitated and resourced to undertake its mandate. We also welcome the fact that there were no increases in personal income tax and corporate income tax in this tough economic and operating environment. In addition, BUSA welcomes efforts to strengthen the National Prosecuting Authority’s state capture unit.

 

“We previously characterised Minister Mboweni’s medium-term budget policy statement in October 2018 as a reality check,” said BUSA President Sipho M Pityana.

 

“This Budget is a wake-up call that South Africa has run out of time. It affects all of us, and we should all be concerned. Drastic interventions are needed by Government to provide clarity on economic policy, manage Government debt, and contain the increasingly negative economic impact of ailing SOEs.”

 

 

 

Business Unity SA (BUSA) views new Finance Minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS) as an honest and comprehensive reality check for SA to address its macro-economic and fiscal fundamentals in order to prevent further deterioration in growth and to reverse negative trends.

 

The MTBPS comes on the eve of SA’s Investment Conference and correctly emphasises the imperative to ease the regulatory burden of doing business and to put in place other interventions that will stimulate investment into the country. Statistics SA data on 2018 second quarter GDP shows that the country entered a technical recession and documented a decline in gross fixed-capital formation, which is a key enabler of growth. Policy and regulatory certainty are critical mechanisms through which to stimulate investment. BUSA welcomes the reinforcement of the National Development Plan as SA’s blueprint policy document, as well as the commitment to relook at the regulatory obstacles to investment and doing business in the country.

 

The Minister’s acknowledgement that the country needs to live within its budgetary constraints is an essential principle that has been underscored by the business community.

 

BUSA welcomes the government’s positive response to social partners’ appeals for the carbon tax and carbon budget to be aligned. The general thrust and posture of the MTBPS is supportive of more collaboration among the social partners and to sustain the momentum generated from the Jobs Summit process. But greater recognition could have been given to freeing up the constraints on small business to create a more enabling environment for small businesses to participate in the economy. The collaborative approach emphasised and the acknowledgement of the critical role of the private sector in the speech create a conducive environment to improve SA’s current economic narrative and trajectory. Similarly, so will the emphasis on the independence of the Reserve Bank and the importance of inflation targeting.

 

BUSA President Sipho M Pityana said: “Business is particularly concerned about the low levels of domestic investment, as the general trend is that this impacts on foreign direct investment. Minister Mboweni had a tough balancing act amid a deteriorating operating environment underscored by a technical recession. It is important that the government delivers on the promises and commitments made in the MTBPS.”

 

“The commitment to curb corruption is particularly welcome, given the scourge and cost of state capture on our national resources. This is pronounced in the state of mis-governance and maladministration in state-owned entities (SOEs) and the South African Revenue Service (SARS). It is, therefore, imperative that the government make good on its commitment to restore lost trust and confidence with the body politic,” Pityana added.

 

BUSA notes the commitments made to abide by the fiscal expenditure ceiling and the reprioritisation of funds to productive sectors, particularly agriculture and infrastructure. Identifying the need to reduce the debt-to-GDP ratio, narrowing the budget deficit, strengthening the leadership capability and collection capacity of SARS, and speeding up value-added tax (VAT) refunds will go some way in improving SA’s macro-economic and fiscal environment. BUSA notes the Minister’s position on the user-pay principle in the context of e-tolls. The Minister’s emphasis on reconfiguring SOEs and inviting the private sector is a positive signal.

 

Business welcomes the government’s undertaking to clean up governance at SOEs, to make sure parastatals are less reliant on bailouts and government guarantees, and to ensure that there is an effective consequence management framework to deal with corruption. The commitment to ensure that there are competent and capable public servants, particularly at municipal level, is a step in the right direction. However, this must to be implemented, and not just spoken about.

 

Notwithstanding the positive signals to the market and investors emanating from the MTBPS, BUSA is concerned about the deterioration in the forecast for the debt-to-GDP ratio at 59.6% by 2023-24, as well as the budget deficit peaking to 4.2% in 2019-20 and 2020-21 arising from an increased borrowing requirement. In this context, urgent implementation of stated growth-enhancing reforms is required to generate the economic and revenue growth necessary to stabilise the fiscus.

 

 

 

This week’s budget speech takes place in the context of renewed optimism for South Africa’s economic prospects, exemplified in recent rand strength. While business in many respects shares this optimism, it is also aware that much depends on the minister of finance’s ability to convince lenders, investors and the ratings agencies of South Africa’s commitment to fiscal consolidation in a manner least disruptive of economic growth.

The following are key considerations in respect of the 2018 budget:

Public debt

The primary risk facing South Africa’s public finances in recent years has been the steadily-rising budget deficit and debt-to-GDP levels. Indeed, if National Treasury guarantees to state-owned entities (SOEs) are included, South Africa’s overall government debt is in excess of 70% of GDP – making a ‘debt trap’ difficult to avoid. This has been a feature of recent budgets, with about 13% (and rising) of current government revenue diverted towards debt servicing.

Stabilising, and ultimately reducing, debt-servicing costs are a precursor to further increases in social spending and reductions in poverty, inequality and unemployment in a sustainable manner. Further sovereign ratings downgrades are likely to be difficult, but not impossible to avoid and will depend on credible fiscal consolidation measures.

The dilemma: expenditure reduction vs revenue raising

In the immediate future, only two broad avenues to reach fiscal sustainability are available, namely reductions in government expenditure or increases in revenue (taxation). In reality, a combination of both is likely and necessary. Over the longer term, only economic growth can sustainably balance the dual requirements of sustainable public finances and pro-poor policies. Any increases in revenue therefore need to ensure that growth is not prohibited by excess taxation.

Tax policy

Government expenditure has been made possible in recent years by a steady growth in tax revenue, mainly in the form of personal income tax (PIT) at a rate in excess of GDP growth. However, problems are arising – tax collection has been falling short of forecasts and the budget will likely reveal a further significant shortfall in tax revenue (forecast in October to be just short of R51 billion).

Evidence is emerging that taxation is beginning to reach levels where further increases would be self-defeating, through the negative impact on economic growth and levels of compliance. In short, the emphasis in the budget should be on reducing expenditure, which should include the sale of non-core assets as part of the solution.

Notwithstanding, tax increases appear inevitable in the short term and in this regard increasing value-added tax (VAT) appears at the current juncture the least-damaging option.

However, business agrees that this is a regressive tax that disproportionately affects the poor. Therefore, compensatory mechanisms should be considered.

A 2% increase in VAT to 16% would yield approximately R40 billion. When combined with an increase in zero-rating for basic goods and increased social expenditure to compensate the poor, R30 billion could be raised through the increase in VAT to 16% which, when combined with other measures (including, for example, limiting fiscal drag relief in PIT), could address a significant part of the budget deficit.

Expenditure reduction

Arguably, the biggest risk to achieving reductions in expenditure lies in the lack of control in spending by SOEs in recent years, with poor governance appearing the primary cause. Continued bailouts by Treasury for SOEs have undermined the credibility of fiscal consolidation measures and served to reduce the finances available for social spending. Of particular concern in this regard is Eskom, with government’s adherence to an outdated model of a vertically-integrated, State-owned monopoly electricity utility the primary cause.

Answers to the particular problem posed by Eskom (and other SOEs) need to be addressed according to economic rationale and whether they support national developmental goals. Consideration should therefore be given to a degree of strategic unbundling that encourages private sector investment. Policy also needs to support the fiscus – solving the problem of Eskom for example is impossible without the finalisation of a least-cost integrated resource plan.

Policy priorities

As a general rule, government needs to exercise caution around policy pronouncements where costing has not been addressed. While business supports the objectives of a number of government programmes, including expanding access to tertiary education, National Health Insurance and Comprehensive Social Security, it is necessary to create the fiscal space for the delivery of such programmes.

Credible cost-benefit analyses should accompany any new (and even existing) fiscal commitment.

Non-performing government programmes should be terminated post-haste, and fruitless and wasteful expenditure eradicated.

In the near term, public sector wages present a major risk. While business is sensitive to under-pressure workers, any settlement in excess of CPI will inevitably have the effect of necessitating expenditure reductions elsewhere (e.g. social spending) or increasing revenue to self-defeating levels.

Support for growth

Business recognises that there is currently very limited fiscal space to support growth. However, long-term fiscal sustainability requires growth and options to consider, among others, include:

• Tax incentives for companies that demonstrably boost exports, create jobs, etc. where benefits can be shown to exceed the costs of the incentive;
• Support for high-potential sectors such as tourism through, among other measures, easing tourist visa requirements;
• Boosting access to broadband through a national digital strategy to enable South African firms to take advantage of the fourth industrial revolution; and
• Creating regulatory certainty for business in general, including reducing the regulatory burden for small business.

Conclusion

The 2018 national budget is critical and will necessitate tough choices on the part of government. Fiscal consolidation, through moderate revenue increases and expenditure reductions, holds the only prospect of sustaining government’s pro-poor, pro-growth policies over time.

Simply put, failure to get spending under control may result in an extended period of enforced austerity should South Africa be forced to seek a bailout. This would have devastating effects for all South Africans, but particularly the most vulnerable.

It is essential that this week’s budget displays the leadership necessary to balance the budget and create the conditions for growth, job creation and transformation.

Olivier Serrao is director of economic and trade policy at Busa.

Business Unity South Africa (BUSA) welcomed the 2018 National Budget indicating that it is generally well balanced, notwithstanding the difficult economic circumstances under which the Budget is presented.

BUSA stated that the Budget was incremental and cautious, spearheaded by a clear direction given by President Ramaphosa in the State of the Nation Address, where the President stated that as a country we will leverage the capability and commitment of all social partners to leverage our economic potential as inclusively and quickly as possible. “We believe the Minister made correct choices in challenging circumstances, taking advantage of a rising tide of confidence coupled with a more positive economic outlook”, stated BUSA President, Jabu Mabuza.

Expenditure Reduction

BUSA welcomed the expenditure reductions contained in the Budget, amounting to R85 billion over the medium-term framework, despite the allocation of an additional R57 billion for fee-free higher education and training. In particular, BUSA noted with approval:

• The intention to develop robust turnaround strategies (including addressing capital structures that are too reliant on debt), accompanied by good governance, and capable Boards and management, to address chronic overspending in State Owned Companies (SOCs) and focus on their core mandates.
• The commitment by government to finalise a framework on guarantees for SOCs aimed at reducing the exposure to and improving the quality of its guarantee portfolio, as well as the commitment to disposing of non-core assets and bringing in the private sector where possible and appropriate.
• The Minister’s announcement that government intends to limit public sector wage increases to fair and sustainable levels.
• Reduction in national Departments’ operating budgets, including the reduction of cabinet, without compromising social spending.
• Capacity support and interventions, including turnaround strategies, to ensure municipalities reflect the full cost of services, particularly water, collect the funds that are owned to them and adopt credible budgets.

BUSA cautioned there is much work remaining in achieving fiscal consolidation, with the increase in the debt-to-GDP ratio to 56.2% by 2022/23. In light of this, adherence to fiscal targets and achieving economic growth forecasts was critical, stated BUSA.

Revenue Generation

BUSA acknowledged the need to raise revenues through a variety of tax measures including: the 1% increase in VAT, below inflation increases to personal income tax rebates and brackets, higher excise duties on luxury goods alcohol and tobacco, estate duty for estates greater than R30 million, and the increase in the fuel levy.

“While no tax increase is welcomed, the increase in VAT by 1% to 15% is the least damaging option to generate the majority of the revenue increases earmarked by the budget. The combination of the VAT increase, together with the compensatory mechanism of an above inflationary increases in social grants will offset some of some of the impact of the VAT increase on the poor. Ideally, we would have liked to have seen the VAT increase accompanied by an increase in zero rating for basic goods to further compensate the poor and most vulnerable in society”, stated BUSA CEO, Tanya Cohen.

Policy Certainty and Pro-Poor Growth Stimulating Interventions

BUSA noted and welcomed the projected fall in the budget deficit from 4.3% in 2017/18 to 3.6% in 2018/19. However, Treasury projections have in the past proved overly optimistic with regard to the budget deficit and GDP growth. Achieving GDP growth of 1.5% in 2018 will require a suitable and certain policy environment, which was clearly acknowledged by the Minister of Finance.

BUSA expressed concern about the announcement of the implementation of the Carbon Tax by 1 January 2019 when there are significant implementation challenges, and the country is on track with nationally determined contributions to reduce greenhouse gases. It welcomed, however, the indication that further environmental taxes would not be introduced in the absence of a policy brief which BUSA trusted would be fully consulted upon in Nedlac.

Pro-poor spending relating to social grants, basic education, higher education, subsidised public housing and services for poorer households was welcomed, particularly given the limited fiscal space to do so, said BUSA.

“We welcome the reprioritisation towards supporting the growth of small and black owned enterprises in agriculture”, stated Cohen, indicating that this would go some way towards accelerating food sustainability, growth and transformation in the sector.

The allocation of funding to industrial incentives, while significant, was regarded as insufficient to support the growth and employment objectives of the country, stated BUSA.

BUSA appreciated the acknowledgment by the Minister of the role played by the Nedlac’s Public Monetary and Finance Chamber in identifying options with respect to expenditure reduction and revenue increases. BUSA has participated extensively in these discussions, as the apex business organisation represented at Nedlac. “ We welcome Treasury’s engagement with social partners and believe that a collaborative approach harnessing the resources, commitment and experience of business is critical if South Africa is to achieve its economic potential”, stated BUSA Vice President, Martin Kingston.

BUSA indicated that it remains committed to working with National Treasury and other government departments, within and outside of Nedlac, to ensure that inclusive economic growth can be achieved through the intentions detailed in the 2018/19 Budget.

 

South Africa’s Medium-Term Budget Policy Statement (MTBPS) will have to incorporate bold cost containment measures with appropriate levels of revenue collection if Government’s pro-growth policies are to be sustainable over the medium to long term, Business Unity South Africa (BUSA) said today.

Speaking ahead of the MTBPS, which Finance Minister Malusi Gigaba will deliver on Wednesday next week, BUSA CEO Tanya Cohen said while tax increases have, in recent years, been part of the solution to funding the deficit, further increases will stifle the economy – making cost containment and generating efficiencies imperative in the context of South Africa’s weak economic growth and declining tax revenues.

“Given that only two options are available to deal with the deficit, namely increased revenue collection in the form of taxes, or reductions in expenditure, the emphasis must fall on the latter. South Africa has simply run out of space to increase taxes significantly in the current socio- -economic and political environment without doing undue harm to the economy. Expenditure reduction is therefore the only sustainable avenue to fiscal consolidation. However, this should not be at the expense of social spending but rather through generating efficiencies within government”, said Cohen.

Business remains profoundly concerned about continued loss-making by SOEs, bail-outs and providing guarantees by Treasury and perceives this to be an ongoing threat to the fiscal consolidation process and urges government to implement measures to ensure that SOEs are governed independently, responsibly and sustainably.

“State-owned entities such as South African Airways, Eskom and the SABC complete a worrying picture of chronic overspending. There is no doubt that poor governance, corruption and maladministration play a significant role in the dismal financial performance of SOEs, particularly those in the energy sector. Efforts aimed at securing eradicating wasteful and fruitless expenditure and curtailing losses of SOEs require immediate intervention support and implementation.”

“The current fiscal space simply no longer allows for public funds to be channelled to chronically underperforming entities which contribute questionable value to the economy over the long term, “said Cohen.

BUSA stated that Business would expect Minister Gigaba in the MTBPS to demonstrate how the recent bail-outs of SAA amongst others, will ultimately prove fiscally neutral. At the current juncture, other significant spending commitments, particularly National Health Insurance (NHI), Comprehensive Social Security (CSS), or the Nuclear New Build Programme should be approached with extreme caution from a fiscal perspective. While programmes such as NHI and CSS are imperatives, alongside improved access to skills and education provision, fiscal commitments should be on the basis of credible cost-benefit analyses”, continued Cohen.

In its submission to National Treasury of objectives that should guide the 2017 MTBPS, BUSA is advocating for:

• A firm commitment to macroeconomic, fiscal and institutional stability.
• Rooting out corruption, as well as irregular, fruitless and wasteful expenditure.
• Improved and consistent communication on the part of government and its agencies.
• A stable, certain regulatory environment.
• Reliable and affordable infrastructure.
• Coherent policies across departments, ministries and agencies.
• Functioning and competent, fit for purpose SoEs with appropriate governance and oversight
• Improved skills and education to drive competitiveness.
• Clear and tangible progress on the implementation of government initiatives to address economic growth and confidence e.g. 14-point plan.
• A strong pact between government, labour and business.
• Positioning business as a national asset, particularly to boost entrepreneurs and small businesses.

“The lack of decisive measures to stabilise debt and address governance challenges will inevitably result in an extended period of enforced austerity that threatens our sovereignty. The main victims of this will, unfortunately, be the poor and most vulnerable. Losing control of our public finances will imperil the capacity of the state to address social developmental concerns. South Africa needs strong leadership and political will to curb over spending, stabilise debt, avoid further downgrades and address governance challenges in order to restore confidence and credibility. This is a critical moment for Minister Gigaba and the country. As always, business stands ready to play its part in South Africa’s path to economic and social development”, Cohen concluded

 

Business Unity South Africa (BUSA) commends Finance Minister Pravin Gordhan, Deputy Minister Jonas and National Treasury for delivering an exceptionally well crafted and progressive budget for Government that balances key country challenges against the need for accelerated economic growth and employment enabling meaningful and sustainable transformation.

“Business supports and welcomes Minister Gordhan’s budget and is committed to working alongside all stakeholders, including Government, Labour, and Civil Society to achieve our collective goals for inclusive growth in a transformed, economically vibrant society,” says BUSA CEO Tanya Cohen.

Prioritising education, health in social spending and stimulating employment creation

BUSA supports the prioritisation of education and social spending as well as the reforms in public procurement, which it believes will generate improved efficiencies in state spending.

“Targeted interventions in education, health along with the implementation of the national minimum wage will, in line with the country’s development goals, help to combat inequality and provide the basis for sustainable, inclusive, economic growth. Any investment in skills development and education is an investment in our collective future,” stated BUSA CEO Tanya Cohen.

BUSA acknowledges the emphasis on employment in the Budget speech. BUSA regards all effective interventions to stimulate employment as crucial, particularly those targeted at increasing the participation of youth, women and poor people in the economy.

Increased Tax Proposals

BUSA acknowledges the need for a progressive approach to raising the taxes that are needed to address inequality and transformation. BUSA therefore embraces Treasury’s tax proposals, including maintaining Value Added Tax and Corporate Income Tax at current levels. While no tax increases are welcomed, BUSA recognises that they are necessary to balance the budget. In this regard, the implementation of a high tax bracket and increased tax rate is both progressive and responsible.

 Fiscal consolidation

BUSA supports the stabilisation of government’s wage bill and efficiency and cost containment efforts targeted at stabilising government debt at 48% of GDP over the next three years. Furthermore, Treasury is to be congratulated for maintaining the budget deficit for 2017/18 at 3.1% of GDP, in line with previously articulated fiscal consolidation commitments.

Cost containment in relation to SOEs in the Budget

Business welcomes the commitment by government to reinforce governance and accountability and to clarify development mandates at SOEs to strengthen the economy. BUSA notes with approval the emphasis on power solutions such as IPPs that the country can afford.

BUSA CEO Tanya Cohen said: “We recognise the commitments made to improve governance and support cost containment of operations in SOEs.”

Creating a conducive environment for private investment through collaboration and inclusive growth

NHI and CSS are acknowledged as imperatives alongside complementing the commitment to education and health. BUSA supports the view that we need to create the fiscal space to fund the implementation of these programmes, recognising the critical contribution of business to the fiscus and addressing the challenges of poverty, inequality and unemployment. The country needs to enhance the investment environment so that the economy can grow and deliver to developmental objectives.

BUSA is particularly pleased about the decisive focus provided by the Budget in relation to inclusive economic growth. Commitment to address regulatory burden, particularly in relation to business registration, small businesses and doing business generally and in specific sectors is welcomed.

Business is committed to playing its part in Government’s transformation agenda and to acting,  in partnership, to grow the size of the economy. This requires that we transform the economy through black economic empowerment and other measures which fully integrate all members of society in contributing to and benefiting from the economic potential of the country. BUSA welcomes the call by government to increase private-sector participation in sectors dominated by public enterprises, and to ensuring that effective regulatory authorities curb the power of monopolies. An environment that enables smaller enterprises across sectors to access the market and thrive is critical to inclusive growth.

The emphasis on collaboration, and active business engagement as a mechanism for building sustainable solutions is to be welcomed.

“As BUSA we welcome the focus on inclusive growth and the underscoring of the imperative to accelerate economic empowerment efforts in our collective interests as a country. This will grow our economy, create jobs and enable us to deliver to our developmental objectives” stated Cohen

BUSA President Jabu Mabuza said: “We welcome Minister Pravin Gordhan’s focus on a transformation budget that is premised on sustainable and inclusive growth for all South Africans. We are pleased that the Minister sees Business as a key partner to unlock growth and grow small to medium enterprises to alleviate unemployment and inequity. We are fully behind Team SA, and will work hard to maintain our investment grade rating, and to sustain and service government borrowing. Business is ready to play its part in the transformation agenda and to work together with all other sectors of society to build a prosperous and inclusive South Africa.

Business Unity South Africa (BUSA) is hopeful that this week’s Budget Speech by the Minister of Finance Pravin Gordhan will emphasise the fiscal balance required for South Africa to facilitate investment and achieve inclusive growth in order to meet the country’s developmental objectives.

“A balanced budget that incorporates cost containment measures with sustainable, and where necessary, limited, yet progressively designed, tax increases is the only way of sustaining the long-term government’s pro-poor, pro-growth policies, while keeping the economy afloat,”  stated BUSA CEO Tanya Cohen.

Balancing a pro-poor Budget requires further fiscal consolidation

Business expects the Budget to demonstrate further efforts to ensure fiscal consolidation. “Maintaining a balanced Budget requires, in addition to moderate and carefully targeted revenue increases, further efforts towards fiscal consolidation. This includes pursuing greater efficiencies across Government departments, as well as cost containment measures, eradicating wasteful and fruitless expenditure and in particular curtailing losses of State-owned Enterprises (SoEs),” said Cohen.  

Cost containment in relation to SOEs is a critical focus for the Budget

Business remains profoundly concerned about continued loss-making by SoEs and applicable guarantees by Treasury.

BUSA CEO Tanya Cohen said: “We note the commitments made by Government in the 2016 Budget pertaining to improved governance and cost containment on operations in SOEs. We are hopeful that the Budget will give greater effect to these commitments.”

Balancing a pro-poor, pro-inclusive growth Budget requires considered and careful tax increases

BUSA expects that revenue increases to balance the budget will be in line with the October 2016 Medium Term Budget Policy Statement. The revenue shortfall will require increases in certain taxes – this must be given effect to in a manner that is pro-poor and pro-inclusive growth.

BUSA CEO Tanya Cohen said, “Whilst business recognises that increases in certain taxes are required, the inability to grow the economy inclusively and to create sustainable employment means that such increases need to be kept to a minimum. They should not be extracted in such a way as to deter investment in the economy. ”

Balancing the Budget requires an environment conducive to private investment

BUSA is confident that Treasury will strike the appropriate balance between fiscal prudence and building on the advances made in social and economic transformation since 1994.

BUSA President Jabu Mabuza said: “There is a limit to what can be achieved by the Minister of Finance and through the budget. The real issue is to ensure that our economy grows adequately on an inclusive and sustainable basis. In the last 12 months Team SA has done remarkably well to “hold the centre”, maintain our investment grade rating, and sustain and service government borrowing. But more action is needed to pursue a stable, predictable, policy and fiscal environment that stimulates investment. Business is ready to play its part and we are hopeful that the Budget will help create an environment where that can be sustainably achieved.”