He then went on to cut the economic growth forecast from 1.7% to 0.9% for 2016 and then announced a range of new measures in a bid to prevent South Africa from entering recession. In the past month, the finance minister has held meetings with heads of the country’s biggest companies to ask their advice on ways to stimulate the economy, while Zuma promised measures to appease the rating companies, including spending restraints and privatisation of some state-owned companies.
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South Africa is at risk of becoming a “kleptocracy” if business ethics doesn’t improve, Finance Minister Pravin Gordhan said. South Africa’s official unemployment rate is 25.5%, and with economic growth falling below the rate at which the country’s population of 55 million is expanding, the budget noted that per capita incomes are in decline.
Traders said most trading in the session would likely come after the budget as the country and certainly foreign investors eagerly await Gordhan’s proposals on how he is going to try and fix the fiscal situation in the country.
“We do not need to be invested in four airline businesses”, Gordhan told parliament.
Mark Joffe, CEO of Global Credit Ratings, said the Budget Speech showed a pragmatic approach by Gordhan against a backdrop of subdued economic growth, twin deficits and a rising trend of government debt to gross domestic product.
Higher food prices and exchange rate depreciation have contributed to the higher inflation forecast for 2016, as businesses are expected to pass the costs of a weaker rand on to consumers more than in the recent past.
When introducing the revised National development plan, Gordhan stressed that initiatives focusing on skills and training, sustainable growth and infrastructure development were of top priority.
These include the loss-making national carrier South African Airways, long a target of government critics.
The Democratic Alliance said Gordhan did not do enough to avoid a sovereign ratings downgrade in South Africa.
Government must also stop bailing out failing state-owned entities, the minister said.
In its budget review outlining spending plans for the next three financial years, the Treasury said the government departments’ budgets for non-essential goods and services had been cut by 5 billion rand over the medium term.
Abuses in the private sector will also be targeted.
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“In acting together we can address declining confidence and the retreat of capital, and we can combat emerging patterns of predatory behaviour and corruption”, Gordhan said. We will not allow the budget to be balanced on the backs of young people who do not have jobs, or have given up looking for jobs, in South Africa.
