The budget statement on Wednesday provided a very sobering reminder of South Africa's fragile fiscal position. The combination of a 2017 growth forecast reduced from 1.3 percent to 0.7 percent, a budget deficit projection of 4.3 percent (up from 3.1 percent) in 2017/18, and tax revenues forecast to fall R50-billion short of budget projections, was at the negative end of predicted outcomes.
Against this backdrop, what BLSA had hoped for was a statement that instils confidence among businesses and investors that the minister had the necessary plans to address the very significant challenges the country faces.
Unfortunately, the statement was deficient in critical areas. In the short term, it lacked the detail necessary to give confidence that the minister has adequate plans to combat the very worrying deterioration in the country's finances. In the medium term, the absence of fresh thinking about how to reboot the economy's growth prospects also failed to instil confidence.
While the minister gave due attention to state-owned companies, he failed to provide the reassurance business is seeking that government will no longer bail out badly governed state companies. He also did not draw the obvious conclusion that the economy is in no state to bear the costs of the proposed nuclear deal.
With government's finances so constrained, it falls to business to be the key engine of economic growth.
As a result, the country is left in the unenviable position of facing low growth, increased borrowing needs and higher financing costs. With the minister having failed to provide a suitable way forward, the country is vulnerable to a further sovereign credit downgrade next month.
With government's finances so constrained, it falls to business to be the key engine of economic growth. BLSA recognised this responsibility with its recently launched Contract with South Africa.
We welcome the invitation of the minister to work with business in his efforts to reboot the economy and help it exit the "slow zone". An urgent priority will be revisiting the Mining Charter, about which the minister's comments about the need for government and business to establish common ground were encouraging.
This post first appeared in Business Leadership South Africa, on October 25, 2017.