Western Cape Treasury hosts Fiscal Policy Seminar
Finance Minister, Dr Ivan Meyer recently hosted the second Western Cape Fiscal Policy Seminar with the theme of “A strengthened approach towards a budget for growth”.
The seminar builds on the premise of shared fiscal and economic ideas across the public and private sectors and academic institutions. Key outcomes of the seminar contribute to the Western Cape 2017 budget address and more holistically, inputs into the Provincial fiscal framework.
The 2016 Fiscal Policy Seminar demonstrated that the current economic situation is complicated and is influenced by international and domestic factors. Possible solutions to address the challenging economic realities include using fiscal policy measures, monetary policy, but more importantly structural reform to turn the economy around. It requires a clear agenda to change South Africa’s current low-growth path and reducing unemployment. Other suggested solutions included creating investor confidence to ensure investment from the private sector as well which requires investor confidence.
The 2016 National Medium Term Budget Policy Statement highlighted that subdued growth is expected to remain and emphasised that measured fiscal consolidation will be applied. Due to lower than projected economic growth and revenue collection, national government proposed reductions to the spending ceiling. Two fiscal challenges remain, namely avoiding a low growth trap (over the medium term) and realising the aspirations of the Constitution within available resources (over the longer term). A balanced fiscal consolidation approach is thus required, with difficult trade-offs ahead in expanding public resources that are available for social and economic development.
South Africa has reached a fiscal plateau, with the danger of a possible fiscal cliff looming which requires strong measures of fiscal consolidation. This will require a balance between fiscal consolidation and structural reform. Short term fiscal discipline measures should not compromise long term fiscal policy objectives which will require investment in innovation, in particular looking at Governments role as an ‘entrepreneurial state’.
Research shows that labour and capital contribute positively to provincial economic development therefore if provinces properly perform the basics of Education, Health and Infrastructure the economy will benefit. In addition, provinces should investigate potential new sources of own revenue, in addition to strengthening current measures to ensure optimal collection.
Click here to view the main speaking points of each the presenters.