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Johannesburg, 28 October 2020 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes Finance Minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS), with SEIFSA Chief Economist Michael Ade saying it sends a positive signal to the broader business community.

Dr Ade said the 2020 MTBPS took place amid weakening economic growth, with the South African Reserve Bank forecasting growth for 2020 to be -8.2% and light at the end of the tunnel only expected in 2021. Moreover, oscillating business confidence, doggedly high and unsustainable levels of unemployment and inequality, an uncertain global economic environment with inward-looking trade and economic policies, and the possibility of further sovereign ratings downgrades – with their associated consequences in the near term – were compounding the already difficult economic environment.

“The possibility that the Government may commit to targeted expenditure despite the need for more stringent fiscal consolidation, monitoring and evaluation of spending priorities is commendable,” said Dr Ade.

He said he was encouraged that spending was projected at R6.21-trillion over the medium-term expenditure framework period, against the backdrop of the COVID-19 storm, increasing production costs, a volatile exchange rate, low Government revenue collection and a persistent economic recession.  He noted that it was encouraging that the Government remained committed to fiscal sustainability, despite the weak economic outlook and the deteriorating fiscal position.

“The 2020 MTBPS sets out ambitious consolidation targets to achieve a primary surplus by 2025/26, which requires substantial spending reductions, particularly to the wage bill, to stabilise debt and improve the composition of spending,” he said.

He added that measures to manage and reduce public-sector pressures and risks over the medium term were welcome, as these are likely to be positively received by the ratings agencies, with spill-over benefits for the private sector.

Dr Ade said the MTBPS was correctly cognisant of prevailing conditions and also placed significant emphasis on the need for the Government to re-allocate under-utilised funds from non-performing departments to those that were in urgent need of funds.

“The essence is to ensure that departments can make impactful spending to boost demand and infrastructure development as these are key to the Metals and Engineering sector and other inter-related industries,” he said.

Dr Ade noted that the MTBPS highlighted the need to develop a range of policy decisions in each sector, including more efficient and cost-effective methods of implementation in order to align spending with available resources.

Dr Ade added that the planned increase in public infrastructure spending over the next three years was welcome because, together with other planned spending on infrastructure, it would help stabilise and reignite demand for the intermediate or finished goods of beleaguered manufacturing businesses.

However, he reiterated that the existing partnership between the Government and the private sector needs to be strengthened in order to implement the various planned infrastructure projects effectively, as outlined in the Presidential Sustainable Infrastructure Development Symposium (SIDS).

Dr Ade also welcomed the fact that the MTBPS highlighted the urgent need for the Government to stabilise its debt and expenditure levels, while also improving revenue collection.

He added that fiscal prudence would continue to form the basis of economic recovery and expenditure would be slightly higher than revenue in the coming year, given the planned increase in infrastructure spending, which would be crucial for sustainable economic growth. This said this was encouraging, given its positive implications for the M&E sector.

“We look forward to the detailed blueprint that will be provided in the upcoming budget speech in February 2021, but we do hope that the plight of local businesses in the manufacturing sector – including its diverse M&E cluster – will also be taken into account,” Dr Ade concluded.

Ends

Issued by:

Mpho Lukoto

Communications Manager

Tel: (011) 298 9411 / 082 602 1725

Email: mpho@seifsa.co.za

Web: www.seifsa.co.za

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