Johannesburg, 24 October 2018 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes Finance Minister Tito Mboweni’s maiden Medium- Term Budget Policy Statement (MTBPS), with spending projected at R5.9 trillion over the medium term, against the backdrop of increasing production costs, a volatile exchange rate, galloping fuel prices, low domestic growth and low Government revenue collection.
“The MTBPS basically provided more impetus to growth as policy makers seek for ways to guide the sick economy as it slowly claws its way back to good health,” SEIFSA Chief Economist Michael Ade said.
He added that the MTBPS was very realistic, reflected the country’s current condition and also placed a lot of emphasis on the need for Government to re-prioritize spending and re-allocate under-utilised funds from non-performing departments to Government departments in urgent need of funds.
Dr Ade said the Budget highlighted the need for structural reforms and for the scourges of corruption and profligacy in Government departments and State-owned enterprises to be ended as a matter of urgency.
“Amongst other imperatives, SEIFSA welcomes the plan by the Government to restructure the electricity sector, including the long-term plan to restructure Eskom. This is good news, indeed, given the importance of electricity as an input to the metals and engineering (M&E) cluster in particular and the manufacturing sector in general,” Dr Ade said.
SEIFSA also welcomed the planned increase in public infrastructural spending to the tune of R855.2 billion over the next three years since that, together with other planned infrastructural spending, will help in stabilising and reducing local logistics costs pressures on businesses. Accordingly, a firm partnership between the Government and the private sector was encouraged in order to promote infrastructural development and also support the Government in delivering on the planned objectives.
“A salient point made by the Minister is the initiative to expedite the process of VAT refunds to businesses to the tune of R20 billion, with R11 billion meant to clear the backlog of refunds and R9 billion meant for the current fiscal year. This is good news to financially-strapped small businesses. It is also good supply-side economics, meant to put money back into the coffers of businesses in order to stimulate corporate spending and boost economic growth. Ultimately, consumers will benefit from a lower cost of production, resulting in more employment,” said Dr Ade.
Most importantly, Dr Ade said SEIFSA welcomes yet another deferred imposition of the proposed carbon tax. Although the implementation of the carbon tax has been postponed several times since it was introduced nine years ago, it was now imminent, with a second draft bill published for comment and scheduled for early January 2019.
Instead of the tax being imposed on 1 January 2019, it has been postponed to 1 June 2019.
Dr Ade said SEIFSA had repeatedly argued that the carbon tax was regressive and that the broader society may be affected disproportionately.
“Also considering the prevailing difficult operational environment of businesses, it is misguided to further burden businesses with a carbon tax as short-term gains can leave long-term effects. The planned postponement is good for embattled businesses,” he said.
Dr Ade said the MTBPS highlighted the urgent need for the Government to stabilize its debt and expenditure levels, while also correspondingly improving on its revenue collection. A detailed blueprint will be provided in the up-coming budget speech in February 2019.
“As the Government seeks for ways to plug existing gaps in public finances in next year’s budget speech, including closing the imminent shortfall of R1.2 billion revenue loss arising from a planned zero-rating of key items generally consumed by the poor, SEIFSA hopes 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.
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Web: www.meindaba. seifsa.co.za