Mr Langenhoven said that despite undertakings by Mr Nene in his budget speech in February to stimulate economic growth and to keep a tight rein on Government spending, there had been lacklustre growth and the public wage bill had grown by two percent faster than inflation.

“These developments have left the Minister with virtually no policy space to stimulate the economy. One gets the feeling that he is simply buying time and accepting lower growth in economic expansion and investment for the next two years,” Mr Langenhoven said.

He said that the structural reforms that were needed to accelerate growth all related to capital expenditure that would only have an impact over the medium to longer term. These included a long list of projects, but Minister Nene pointed out that capital spending had declined in real terms and that capital transfers to local authorities – which had the least capacity to implement programmes – had grown.

“The project to re-establish a national capital budgeting framework probably had the most potential over the longer term, but there appears to be a national consolidation plan for capital expenditure budgets, at a time when localised integrated development plans were not successful in the past,” Mr Langenhoven said.

He added that the other side of the coin of lower capital expenditure was Mr Nene’s predicament to contain the impact of above-inflation growth in personnel-intensive sectors such as health, education and security. He said that spending under the economic classification heading of “economic affairs” had grown by 5,9%, with “industrial development and trade” faring the worst with a 4,7% higher allocation.

“The result of the low economic growth and exploding personnel cost dynamics is that deficit reduction has been postponed yet again. The consolidated debt-to-GDP ratios expected to stabilise at 49%, higher than previously thought. Secondly, the deficit before borrowing will be marginally lower than expected this year (3,8% instead of 3,9%), but higher in the following years: 3,3% for 2016/17 instead of 2,6%, 3,2% for 2017/18 instead of 2,5% and 3% by 2018/19,” Mr Langenhoven said.

He said that the primary deficit has been negative since 2008/9 and was hard to eliminate. He said that although there were plans to reduce it, the fact that South Africa was bad when it came to implementation of its plans will eventually erode confidence.

Mr Langenhoven said that the Federation was very concerned that the latest statements and proposed legislation emanating from the African National Congress’s recent National General Conference would elevate the risks to ownership of assets/companies in the economy, “on top of the severe lack of business confidence in the private sector”. He said that such an approach was likely to result in even lower-than-expected investment and. in turn, lower economic growth.

“The medium-term budget policy statement shows the dilemma of low economic growth and the lack of fiscal space to address it. This may well be the time for South Africa to consider relaxing monetary policy, in line with other commodity-dependant countries in order to spark growth,” Mr Langenhoven concluded.