Finance Minister Nene; NDP a game plan for success
On August 1, 2014, Minister of Finance, Nhlanhla Nene, delivered an address at the University of Fort Hare in East London, “This University stands amongst the greatest on the African continent. The University is now a significant intellectual force in our country and long may it last.’’
The 2008 Global Financial Crisis and its aftermath have shown how events far away have implications for us at home. The global economy strengthens but growth is uneven and risks still remain. Growth in developed countries has gained momentum, but remains slow.
Developing economies remain vulnerable to volatile capital flows, and growth is further constrained by supply-side issues similar to the experience in South Africa. Slower growth in China has affected international prices of export commodities negatively, leading to a deterioration in balance of trade.
The IMF revised down its forecast for global growth from 3.7 per cent to 3.4 per cent in 2014. Many economies continue to perform below their potential, reducing demand for exports and hampering ability to grow. Normalisation of monetary policy in the US is likely to increase borrowing costs for emerging economies, including South Africa.
Due to strikes in the platinum sector and maintenance of petroleum refineries, the mining and manufacturing sectors, roughly 20 per cent of GDP, contracted by 24.7 and 4.4 per cent respectively in the first quarter.
Private investment grew by 1 per cent in the first quarter. Private household consumption recorded growth of 1.8 per cent. The growth of the South African economy is not sufficient to address challenges of poverty, inequality and unemployment.
The Quarterly Labour Force Survey shows unemployment rate climbed to 25.5 per cent. Consumer inflation is above the South African Reserve Bank (SARB) target range at 6.6 per cent. “This poses significant risk to the purchasing power of consumers and the cost of doing business in the country.”
The National Development Plan outlines policies and actions, to address domestic challenges, and so do measures to jump-start the economy.
The [NDP] Interventions will allow: Invest in infrastructure; 2014/15 budget commits R847 billion over three years to address infrastructure backlogs to take advantage of preferential access to European and US markets. Opening new universities; to increase number of skilled South Africans and reduce skills shortage. Green economy and the ocean; provide new sources of economic activity, cheap energy and jobs. Industrial incentives; increased and adapted. R6.5 billion has been allocated to fund small and medium-sized enterprises, and improving the tax regime facing SMMEs.
Economic growth in sub-Saharan Africa is expected to exceed 6 per cent in 2014. Africa’s share of global foreign direct investment is rising.
These trends contribute to a cycle of investment and economic growth, supported by consumer demand for goods and services. In contrast, wage and consumption growth has stagnated in Europe and the United States. In 2013, the rest of Africa accounted for over 15 per cent of our dividend receipts and over 20 per cent of our exports.
Government is committed to supporting the expansion of South African firms into the rest of Africa, providing tax revenue, profits and dividends into the receiving country and to South Africa.
South Africa provides a number of advantages as an African hub, including advanced financial, regulatory, tax and accounting standards; a modern telecommunications network; extensive economic infrastructure; and direct air connections to most major cities on the continent and internationally.
The Nigeria economy is now larger than that of South Africa. By relative population size, South Africa remains ahead in terms of GDP per capita.
To continue to attract firms such as Mercedes-Benz, “we must take clear steps to improve the investment climate.”
The National Development Plan sets out a vision, including; Modernised approach to tax policy, “The Davis Committee is currently considering ways to improve our tax system.”
To remain top of world financial regulation, “we are in the process of implementing new reforms to ensure we maintain our leadership in this area.”
Compatriots in Africa have raised their game. “They are implementing economic reforms, building infrastructure, educating their people, and building winning nations. We must do the same, in the National Development Plan we have a game plan for success.”