NATIONAL NEWS - In a statement released by the leader of the DA, John Steenhuisen, earlier this afternoon, he says the postponement of the budget announcement this past week presents the Government of National Unity (GNU) and stakeholders across the economy, with a unique opportunity to reset their approach to SA’s economic future: "A crisis we cannot afford to waste."
For South Africa to avoid serious risk of economic failure, Steenhuisen recommends an urgent spending review and seven specific, equally urgent growth measures.
Here is his full statement:
"For 12 long years, our population has grown faster than our economy, leaving South Africans poorer. Our country has one of the world’s highest unemployment rates, and has remained at the top of that list for decades. As a state, we are drowning in debt up to our necks; and our citizens are taxed beyond what they can bear.
Consequently, our options are close to exhausted.
We cannot continue driving up our debt-to-GDP ratio.
We are already spending 21% of our budget on borrowing and servicing debt. If we borrow more than was announced in the medium-term budget policy statement last October, our creditors will make us pay even more to borrow their money, making it impossible to fund critical economic and social priorities.
Can't raise taxes
We cannot hike taxes any further. As SA Revenue Service commissioner Edward Kieswetter made clear last week, we are at the point where tax increases fail to generate hoped-for revenues because people find ways to avoid paying taxes. And in any event, given the inefficient and ineffective use the government often makes of money, higher taxes serve largely to take money from productive purposes in the private sector and redirect it towards unproductive ones in the government.
At the same time, we should announce an urgent spending review in two parts:
1. A three-month sprint to identify “low-hanging fruit” - programmes and projects that can be cancelled or reduced as a means of freeing up money for priorities that need funding during the coming financial year.
2. A more comprehensive review that reorientates state spending to critical priorities and to programmes that demonstrably deliver value.
In addition, the Minister of Finance, with the backing of the whole Cabinet and all parties in the GNU, should announce a set of ambitious economic reforms and offer clear deadlines for implementation, because deadlines signal commitment, and commitment reassures bond markets and investors.
If such reassurance could bring down the cost of borrowing just a little it would immediately save billions that could be redeployed elsewhere.
Growth measures should include:
• Port and rail reform: Announce 2025 deadlines for the implementation of private concessions in ports and rail to improve efficiency, cut costs and increase trade competitiveness.
• Energy market reform: Announce a dated road map for the creation of a competitive electricity market that enables private producers to contribute to the grid and lowers energy costs for businesses and consumers.
• Tariff and trade reform: Immediately reduce tariffs that make SA manufacturing uncompetitive, thus boosting exports and industrial growth, and eliminating tariffs on products SA doesn’t produce.
• Regulatory reform and red-tape reduction: Immediately accept the World Bank’s offer of a free regulatory review, which can be done within three months, to streamline bureaucracy and cut unnecessary regulations to encourage entrepreneurship and investment.
• Labour market reform: Introduce labour market flexibility, reduce barriers to entry, and foster a more competitive environment by eliminating excessively strict hiring and firing regulations that discourage job creation and limit small business growth. Reforms should include exempting small, medium and micro enterprises from sectoral collective bargaining agreements they are not party to, excessive red tape and the threat of costly legal disputes.
• Public procurement reform: Save about 1% of GDP in public procurement, that would free up resources for critical needs. Public procurement reform based on transparency, competitive bidding and value for money is now needed to eliminate patronage-related premiums. Standardising pricing at market-related costs, enforcing open tender processes and blacklisting corrupt suppliers can curb abuse in the procurement arena.
• Equity equivalents: Make equity alternatives available to investors in place of ownership requirements as the government already does in the automotive sector and has agreed to do in the ICT sector.
Taken together, these and other growth measures can lift South Africa’s growth to 3% and beyond.
It is difficult to emphasise enough how urgent these growth reforms are. It is now five minutes to midnight for our economy and the fiscus.
In the short term, we can absorb the shortfalls we face, but unless we generate the growth required to shift our trajectory, we risk being unable to fund even the most basic needs of our people and abandoning them to a wasteland of poverty from which there is no escape.
South Africa’s only path to success is a bold, pro-growth, and pro-jobs budget. The DA will not waver in fighting for the reforms needed to secure our country’s future."
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