SA needs new growth path – Gigaba

Malusi Gigaba (Photo: GCIS)

Malusi Gigaba (Photo: GCIS)

He painted a bleak picture of the risks associated with government guarantees to battling parastatals.

Finance Minister Malusi Gigaba on Wednesday said he was not sure whether there was scope to increase taxes in 2018, adding it was part of a cycle of fiscal consolidation that ultimately needed to be replaced by a new growth path.

“I am unable to comment on whether we are going to introduce any new taxes in February next year,” Gigaba told a media briefing shortly before delivering his first medium-term budget policy statement in parliament.

“We have over the last four years implemented a fiscal consolidation path which has on the one hand involved reducing expenditure and on the other hand increasing taxes and the question is whether there are any new taxes we can introduce that are going to be easily acceptable to South Africans,” he said.

Gigaba added that any tax increases would have to be the outcome of a process that includes the Davies Tax Commission and public consultation.

He went on to say that what the country needed was increased reforms that would help to kickstart growth, forecast at 0.7 percent for the current financial year, and reduce government debt to give National Treasury more room to manoeuvre in the next medium-term budget period.

“Ultimately, it is not perpetual fiscal consolidation that South Africa needs, it is a new path altogether that addresses itself to increasing the pace and scale of structural reform, increasing the pace and scale of SOE reforms, reducing the government guarantee framework and reducing government debt.

“We are really not in a position that is ideal. But we need to chart a new path of economic growth and development that is going to take us out of fiscal consolidation.”

The minister described his first medium-term budget presentation as “candid” and told reporters that he would be holding talks with ratings agencies immediately after addressing Parliament, with further engagements scheduled for the coming days.

He painted a bleak picture of the risks associated with government guarantees to battling parastatals, notably Eskom and South African Airways, and confirmed that government would be selling off Telkom shares to raise R3.9 billion to partly fund a further bailout for the national airline.

Gigaba further confirmed that the tax revenue shortfall for this year would be R50.8 billion and warned that debt service costs were due to swell to 15 percent of the main budget revenue by 2020/21.




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