Minister of Economic Opportunities, Beverley Schäfer responds to the 2019 budget | Western Cape Government

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Minister of Economic Opportunities, Beverley Schäfer responds to the 2019 budget

21 February 2019

Finance Minister Tito Mobweni’s budget speech yesterday did nothing to outline how this country intends to grow employment and was non-committal on major issues facing the economy. The content has done little to set investors’ minds at rest, and presents many issues of possible concern for ratings agencies.

 

The numbers:

The budget deficit has grown from 4.2% to 4.5% and the country is borrowing R1.2 billion a day. Interest on servicing our debt is costing us R209 billion which is more than three times the entire budget of the Western Cape. Imagine the level of service delivery that could be achieved with that.

 

We have increased spending but we’re failing to increase tax collections. At the current rate, the gap between collection and spending is accelerating. The rate at which it is widening is currently outpacing GDP growth which does not send positive signals to potential investors.

 

Minister Mboweni said that the debt to GDP ratio was likely to peak at 60% in 2024, however, this does not take into consideration failing state owned entities and their inevitable requests for bailouts which could push this ratio to 70%. This is extremely worrying territory for any country to find themselves in.

 

Eskom:

The budget was thin on detail on how President Cyril Ramaphosa plans to deal with Eskom. The R23 billion for the restructuring of Eskom does nothing to address the major question on everyone’s lips: who will pay for Eskom to keep the lights on?

 

Splitting the entity into three does not address the debt situation Eskom finds itself in and the budget gives us zero indication of how we are going to arrive at a more energy secure place and the use of independent power producers to help us do that.

 

State owned entities:

The budget was wishy-washing and non-committal on ailing state owned entities. While Minister Mboweni’s speech alluded to the fact that they may not be necessary, no firm announcements in this regard have been made.

 

Jobs:

While we expected this to be a jobs budget, there was no clear plan as to how the minister and the president will be using this budget to create jobs. South Africa requires a growth rate of at least two percent just to keep unemployment stable. Our current growth rate of 1.8% will likely see unemployment increasing.

 

We welcome the announcement of the R600 million allocated to a clothing and textile competitiveness programme, as this has the potential to create jobs and is in line with plans in the Western Cape to revive its manufacturing, and particularly the clothing manufacturing industry here. However, this is the only tangible, jobs creation plan announced in the speech.

 

Minister Mboweni’s focus on entrepreneurs and small businesses is welcomed, but, by his own admission, they are constrained by “stifling regulations and complicated taxes”. His speech gives no indication of how the government intends to cut the red tape which can suffocate small businesses and stunt job creation.

 

The Western Cape Government recognises the extreme impact that red tape has on businesses, and established a dedicated unit to eliminate these issues. The Red Tape Reduction Unit has in a period of five years, registered R 1 billion in economic savings.

 

 

Policy certainty:

There was nothing in the budget that was aimed at improving business confidence through policy certainty. Both the budget and the State of the Nation Address have sidestepped the issue of land reform without compensation which has created massive uncertainty in the economy and dented investor confidence.

 

Additionally, the tourism industry continues to be plagued by visa regulations. Despite indications that they have been relaxed, they continue to impact tourism and tarnish our image as a family-friendly tourism destination. The regulations must be scrapped in their entirety.

 

While we welcome the allocation of R1.8 billion for the implementation of 262 land reform projects over the next three years and an additional R3.7 billion to assist emerging farmers seeking to acquire land to farm, this funding needs to be backed by hands-on support for farmers, to ensure that they are able to run their business in an economically viable way, they have access to markets, mentorship and infrastructure support.

 

The Western Cape remains the only province to have conducted independent studies of the success of the land reform projects it supports. National government needs to commit to the same level of support and transparency with these 262 projects to ensure that these farmers have the greatest chance at success.

 

Media Enquiries: 

Bianca Capazorio

Spokesperson for the Ministry of Economic Opportunities

(Responsible for the Departments of Agriculture and Economic Development and Tourism)

Tel: 021 483 3550

Cell: 072 372 7044

Email: bianca.capazorio@westerncape.gov.za