SA is again facing the threat of declining global trade, falling industrial demand, delays in investment, liquidation of businesses and stressed financial institutions, says finance minister Pravin Gordhan.
Gordhan was presenting the medium-term budget policy speech in Parliament this afternoon. He said that a year ago it looked like there would be a gradual global and local economic recovery. “That was not to be.”
However, unlike the recession that took out global giants such as Lehman Brothers at the end of 2008, this time there is an “added risk” that “fiscal austerity in some parts of the world will extend the slowdown and deepen the crisis,” said Gordhan.
“Once again, we have to take stock of this uncertain environment and review how we might better address our challenges and seize new opportunities.”
The economy is expected to grow at 3.1% this year, down from the projected 3.4% Gordhan predicted in February. By 2014, gross domestic product is expected to rise by 4.3%, he said.
Gordhan noted that the global environment posses “considerable risks” to both the world's economic recovery and to the outlook for SA's recovery. Although public-sector spending has expanded, he said, not enough is being done to build a growing economy.
“We have to address inefficiency, extravagance and waste in public administration.” Spending also needs to be re-prioritised, Gordhan said.
He argued that economic policy needs to support competitiveness and promote the kinds of structural change that will lead to more rapid, inclusive growth. The medium-term budget proposes a “competitiveness support package” of R25 billion over the next six years to boost industrial development, accelerate job creation and aid enterprises.
The package will build on broader programmes, such as the R8 billion in tax incentives for industrial investment, technology and training, which will benefit recently-approved projects, said Gordhan.
Interventions are needed to raise the level of competition across sectors, provide cost-effective energy, transport, ICT and logistics networks and encourage innovation, he added.
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