SA needs to become more competitive and the private sector is being encouraged to invest more as the country seeks to bolster growth rates in a bid to achieve the goals set out in the National Development Plan (NDP).
The economy continued to grow in the aftermath of the global recession that hit the world in the latter part of 2008, wiping out banking stalwarts such as Lehman Brothers. However, said finance minister Pravin Gordhan, the rate is slower than projected at the time of the 2012 budget, when the economy was expected to hit 3.6% growth this year.
Gross domestic product (GDP) growth reached 2.5% last year, down from the expected 2.7%, and is expected to reach the same level this year before moving to 3.8% next year. Yet, this is not sufficient, as the NDP needs growth of 5% a year in a bid to reach its targets, which includes tackling unemployment and poverty.
"The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall amounting to R16.3 billion. The deficit is now estimated to be 5.2% of GDP in 2012/13," said Gordhan.
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SA's trade performance is holding it back from achieving faster rates of growth, explained Gordhan. He noted that the growth outlook for the next three years has weakened. "Exports grew by just 1.1% in real terms last year, while imports increased by 7.2%."
Some of the foundations of faster growth are in place, said Gordhan. He cited strong capital investment by the public sector - including two telecommunications companies that plan to spend R14 billion this year - as well as more electricity-generating capacity, relatively stable inflation and low interest rates.
However, Gordhan said "this is not enough" and "much more" is needed. "In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy: agriculture, manufacturing, tourism, communications - every sector has to play its part in expanding trade, investment and job creation."
The state will, due to the deterioration in the economic outlook, trim real expenditure growth to an average of 2.3% over the next three years, compared with the 2.9% signalled in October. Government has a pipeline of 368 proposed infrastructure projects between now and 2023, which combined could cost the state as much as R3.6 billion.
Although 40% of the projects are in implementation, only two fall under the telecommunications sector: Sentech's R2.7 billion migration to digital television and R16 billion for the Square Kilometre Array project.
"Government is committed to remaining within the expenditure ceiling set out in the budget. New policy initiatives over the next three years will be financed from savings, efficiency gains and reprioritisation."
Gordhan added that government will institute a comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies.
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