Johannesburg, 26 February 2020 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes Finance Minister Tito Mboweni’s budget speech, which outlined seven guiding plans towards a turnaround economic strategy for South Africa, SEIFSA Chief Economist Michael Ade said.
Dr Ade identified the seven plans as strengthening macroeconomic policy to improve on certainty, transparency and lower borrowing costs, restructuring State-Owned Enterprises (SOEs), opening markets to trade on the continent, implementing the re-imagined industrial strategy, lowering the cost of doing business, leveraging the private sector as far as possible and implementing a sound macroeconomic framework for enhanced growth.
He said the budget continued on the trajectory set last year by indicating that fiscal sustainability will form the basis of economic recovery and growth this year, with a number of steps announced to achieve a net downward adjustment to the main budget non-interest expenditure of R156.1 billion over the next three years, relative to the 2019 budget projection.
Dr Ade said the public transport spending adjustment by R13.2 billion and the R5,2 billion and R3,9 billion respective adjustments in education infrastructure and health allocation were unfortunate but understandable. He said these spelt trouble for the Metals and Engineering (M&E) cluster of industries. However, he welcomed the commitment to infrastructure spending announced by the President during his State of the Nation Address.
Dr Ade said the poor growth scenario and the persistent existence of downside risks from erratic electricity supply and the 25c per litre increase in the fuel levy would compound logistics costs, while the 25c increase in the plastic bag levy to 25c will have additional cost implications for producing companies in the M&E cluster.
SEIFSA Chief Executive Officer Kaizer Nyatsumba said overall the budget showed a welcome determination by the Government to stimulate the economy and to reduce the public wage bill. He expressed the hope that labour would partner with Government to make the country attractive to potential foreign investors.
Mr Nyatsumba welcomed the financial support provided to Eskom, stressing that it was crucially important that the country has reliable electricity supply. He said the provision of resources to the crime-fighting and prosecution authorities was also to be welcomed.
Dr Ade noted the fact that attention is being given to proposals from ITAC on scrap metals and welcomed steps being taken to address productivity growth and to reduce the cost of doing business by strengthening the registration of new businesses within a day.
He said that once the supply side of the economy is directly taken care of, monetary policy can be used to stimulate the demand side, including through consumer spending to
Dr Ade said while it would take time before the economy can be turned around, nevertheless the speech by Minister Mboweni was a bold start. He hoped that it would be received positively by credit ratings agencies.
Tel: (011) 298 9411 / 082 602 1725