MTBPS: Godongwana must show will to revive economy by cutting red tape

Finance Minister Enoch Godongwana must show government’s will to revive the economy and make doing business easier when he delivers the medium-term budget policy statement (MTBPS) in parliament on Thursday afternoon.

South Africans are holding their breath to see if he will at least offer some kind of hope for economic growth, and according to economists, the only way to do this will be to make it easier to do business in the country.

The MTBPS will also be closely scrutinised for its commitment to improving the lot of ordinary South Africans who are struggling following the economic shock of the pandemic lockdowns and any that could still come, says Tendani Mantshimuli, consumer economist at Liberty.

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No major changes expected in MTBPS to grow economy

“While the focus is on the consumer, we need to realise that consumers’ fortunes are by their very nature directly linked to the fortunes of the economy. Therefore, the minister should focus on measures to support the revival of the economy.”

He does not expect any major changes but says continued focus on what will support growth is important because of the significant challenges the economy still faces. The electricity shortages plaguing the country continue to curtail businesses while the fuel price increases will add real pressure to inflation.

Mantshimuli hopes the minister will include measures to ease the electricity supply problems to remove the bottleneck to production that is detrimental to investor and rating agency confidence.

“Further clarity on private power producers would be great coupled with government supporting the use of renewable energy.”

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MTBPS should include concrete measures to grow economy

He would also like the minister to touch on issues such as concrete measures to address unemployment.

“The continued focus on fiscal discipline to reduce the deficit and debt servicing cost is another matter that will weigh heavily on the minister’s thinking, while there is some good news that revenue collection is improving.”

Now that the IMF upped its gross domestic product (GDP) forecast for the country to 5% for this year, higher than the 3.3% Treasury expected, Mantshimuli believes that the key metrics rating agencies look for are better. It is critical that fiscal prudence continues and that the economy continues to grow, which is why managing Eskom is key.

He says rating agency confidence will also be based on the continuation of what government has committed to under the previous minister, namely structural reforms, revitalising state-owned enterprises and containing the public sector wage bill, that has always been a bone of contention.

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Relief from ravages of pandemic in MRBPS

Another important factor is measures directly related to consumers, which should focus on how to continue providing relief from the ravages of the pandemic.

“Beyond this, it will be interesting to see what form other measures could take and how they are funded given the current circumstances.

“This will be the real test to see if government is fully committed to its promises of implementing meaningful measures to revive the economy and give hope to ordinary people who certainly need all the help they can get right now,” Mantshimuli says.

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Beware of forgetting the small foxes that destroy the economy

Angelika Goliger, chief economist at EY Africa, says while Treasury and the Presidency are focused on tackling big-ticket constraints in the energy, transport, water, spectrum allocation and communications space through Operation Vulindela, there are also numerous smaller regulations and processes that make it harder for businesses to operate in South Africa.

She would like to hear the minister broaden the mandate and capacity of Operation Vulindlela from major structural reforms to include a focus on red tape.

Goliger said that while the impact of individual regulations may not be sufficiently headline-grabbing, easing them could serve to improve business substantially and result in net savings to the fiscus in many instances.

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Start with scrapping drivers’ license renewal

The minister can start with scrapping the requirement to renew your driver’s license every five years and other similar quick wins.

“At the same time, we must be wary of taking significant steps forward in one area only to take steps backwards in another.”

Coordination in government can ensure that new regulations and policies at a national and local level are not overly onerous or have unintended negative consequences regarding the economy. South Africa’s local production capacity needs to increase, but it is not helped by protectionist policies.

She also singled out the Competition Commission’s constraints on mergers and acquisitions that hamper the dynamism of companies in South Africa.

“For South Africa’s economy to recover, it is critical that the government shifts its mindset towards a more citizen-centric approach and have regular engagements with the private sector.”