Views
4 years ago

Opportunity Issue 93 - March 2020

  • Text
  • Economic
  • Economy
  • Businesses
  • Regulator
  • Electricity
  • Innovation
  • Infrastructure
  • African
  • Cape
  • Ensure
  • Www.globalafricanetwork.com

FOREWORD Alan Mukoki,

FOREWORD Alan Mukoki, SACCI CEO Resilient Business Confidence Despite various headwinds, the SACCI Business Confidence Index (BCI) improved in February 2020 as it increased by 0.5 index points to 92.7. On an annual basis the index was marginally down by 0.7 index points on February 2019. The slight rise of the BCI in February indicates that the business climate, although gloomy, is battling the odds of a tight financial environment and subdued economy. After the BCI measured 93.1 in December 2019 (the highest BCI level in the second half of 2019), the domestic and global business climate experienced exogenous setbacks additional to the expected local economic slowdown. The exogenous effect of the coronavirus had a notable effect on global financial and commodity markets. Although the effect spilled over to the real economy in terms of global trade and output in certain countries, the monthly BCI data did not reflect major effects in South Africa. However, as in January, the rand, share prices and international commodity prices like that of crude oil and precious metals, varied significantly. Five of the 13 sub-indices of the BCI deteriorated relative to their January 2020 readings, five sub-indices remained unchanged, and three positively affected the BCI in February 2020, namely lower core inflation, increased volumes of merchandise imports, and more new vehicles sales. The business climate deteriorated slightly between February 2020 and February 2019 with the BCI declining year-on-year by 0.7 index points. Higher merchandise export volumes, lower core inflation, and the higher US-dollar prices of precious metals in particular enhanced the business climate compared to February 2019. The President delivered the 2020 SONA at a crucial juncture in the South African economy. The importance of inclusive growth and the removal of structural economic obstacles were emphasised. In addition, the Minister of Finance had to deal with several challenges that emanate from past public finance trends, control, management, macro-economic imbalances, and a deteriorating economic potential and a slowing economic growth in Budget 2020/21. The Budget did not only require a financial balancing act, but also called for measures that do not cause further damage to the economy and stabilise the present fiscal situation. Budget 2020 is no stimulatory budget or even a holding operation but is born out of a desire to stabilise the economy and begin restructuring the environment for a more sustainable position. More painful adjustments caused by subdued economic growth may occur if business and investor confidence are not inspired to higher levels. 4 | www.opportunityonline.co.za

FOREWORD Comment on the Budget Speech The South African Chamber of Commerce and Industry (SACCI), notes the Budget Speech presented by Minister Mboweni. While we acknowledge the tough economic times faced by South Africa, we think this speech missed a critically important opportunity to reimagine the future of the South African economy. There was not enough detail in the speech on the investment expenditure and allocation of resources to stimulate confidence and growth. For instance, the Minister announced an R18bn incentive to industry to retain or create 56 500 jobs without being specific on where this is to be spent and in what type of programmes. This creates an impression that the economic cluster still only has a vague appreciation of the challenging economic conditions and it is not adequately prepared to deal with such conditions appropriately. Similarly, an amount of R6.5bn in small business incentives was allocated with only R2.2bn going to the SEDA. We are not clear what and where the other R4.4bn will be spent. The funding for SMME development and financing should be prioritised as it gives us the main hope of addressing unemployment. It is in the SMME segment where we will get a better return on job creation and innovative economic development. We would have also preferred to see decisiveness on the macro–economic issues and a link in the expenditure to how South Africa intends to deliver on the UN Sustainable Development Goals as well as resource plans on how we plan to deliver of the WEF Global Competitiveness pillars to make SA an attractive investment destination and chart the roadmap to move SA from a developing to a developed economy so that we can deal with the triple challenge of poverty, unemployment and inequality. These are initiatives critical to drive innovation, industrialisation and the necessary infrastructure. We are also unclear how the budget responds to the need to create a capable and efficient state. The budget was silent on how this is to be resourced. We are none the wiser as a society on how we are going rationalise our State-Owned Entities to ensure that they play a constructive role in unlocking and sustaining the value of our economy. We hope Minister Mboweni will be giving further details and clarifications on all these matters through a definitive, consistent and structured manner to the relevant stakeholders such as organised business and labour, with a clear outcomes–oriented approach to demonstrate the urgency and intensity required to stimulate Africa’s most industrialised economy. www.opportunityonline.co.za | 5

Other recent publications by Global Africa Network: