SEIFSA’s Chief Economist Henk Langenhoven said while fiscal consolidation should continue, nevertheless all other necessary steps will have to be taken to engineer the changes that South Africa needs for longer-term growth and prosperity.” He said that Minister Gordhan’s budget speech was so important that without the financial data contained it, it could have been the state-of-the nation address delivered by the President in February.

Mr Langenhoven said that the words chosen by Minister Gordhan for his speech yesterday were indicative of a turning point that needed immediate change.

Mr Langenhoven commended Mr Gordhan for an accurate description of the low point in domestic economic growth and the tough and very competitive international markets, and for his prognosis of our dilemma. He said that it was unfortunate that despite all these changes, South Africa’s structural reforms and policy responses have been sluggish, with economic growth remaining below expectations.

Mr Langenhoven said that he believed that the Minister had probably done enough to dissuade international ratings agencies from downgrading the country’s credit rating. He cautioned that if fiscal policy is too restrictive, it may constrain domestic expenditure and, consequently, growth in the economy.

“The one overwhelming concern is that total demand in the economy, whether from domestic customers or international markets, has not improved and, according to his own analysis, will be gaining momentum very slowly. A real concern is that the right balance might not have been struck; only time will tell though,” said Mr Langenhoven.

Mr Langenhoven said that the Minister had tried very hard to show that investment spending by general government and State-owned enterprises will continue as planned, with some acceleration here and there.

“This emphasis is again aimed at not detracting from spending in the economy. The proof will lie in action plans since so many companies are reporting substantial cutbacks in spending by these entities,” he said.