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Herman Breedt - Immense Challenges Facing SA

Herman Breedt, President of the Johannesburg Chamber of Commerce and Industry.

The mediumterm Budget Policy Statement presented by Minister Malusi Gigaba on the 25 October underscores the immense challenges faced by South Africa on the fiscal front and at a macroeconomic level.

Whilst the Minister reiterated many of the pre-existing problems - a widening budget deficit, rising gross national debt burden, anemic growth and the unending saga of our troubled state enterprises - he missed a
perfect chance to instill some semblance of confidence.

Moreover, as this was his first mini-budget following his appointment in March to replace former Finance Minister Pravin Gordhan, Gigaba also needed to show resolve by offering a realistic plan to put the economy back on a sustainable path.

But instead of a concrete plan, the country and the investing community received another reminder that there remains a vast disconnect between reality and idealism.

Granted, the Minister had little room to manoeuver but as business we expected him to spell out a bolder and decisive call for all social partners to work together to revive growth, tackle wastage and help the country eradicate corruption.

At best, this mini-budget also made it very clear that the road to economic revival will be long and painful as the demands on the fiscus mount.

At every level, the medium-term budget seemed to hint at a bleak set of outcomes over the next three years, especially in terms of the projected debt burden, debt service costs and the drag on the fiscus by some of the troubled state-owned enterprises.

To most of us in business, it therefore came as no surprise that even the government's revenue projections were squarely negative, whilst consolidated spending was forecast to jump by an annual average of 7.3 percent to R1.9 trillion by 2020/21 from R1.6 trillion in 2017/18.

Gigaba forecast tax revenue to miss targets by R50.8 billion this 2017/18 fiscal year. The shortfall is then set to rise to R69.3 billion in 2018/19, and this figure is forecast by the Treasury to climb to R89.4 billion in 2019/20.

Worsening fiscal outlook Much of this revenue shortfall is attributable to slow economic growth. Gigaba's prediction of gross domestic product (GDP) growth of 1.5 percent through 2019 is by all accounts a moving target, and it has more of a downward bias considering the possibility of further ratings downgrades.

In this environment it will be easy to give up, but it is at times like these when business must find its mettle to mitigate the impact of a worsening fiscal outlook.

There are a myriad of factors that we have no control over, but that does not mean we should stand idle, paralysed by our current reality.

As JCCI, we are continually working at initiatives that will keep our members better informed and better resourced to deal with the ructions of a volatile economy. An example of this push was the Africa-ASEAN Business Expo (AABE) and Forum.

This gathering took place this in November at the Sandton Convention Centre. Importers, distributors, retailers and exporters were able to explore trade opportunities in ASEAN, a hub of economic opportunity in what is arguably one of the world's fastest growing regions, South-East Asia.

ASEAN - with its motto of "One Vision. One Identity. One Community" - has seen average annual real growth of 5.3 percent between 2007 and 2015, about four times more than South Africa's current rate of growth.

It is such platforms of opportunity that will provide the means to mitigate the impact of weaker growth on the
domestic front.

JCCI aims to foster cooperation between local business and their overseas counterparts so that local business is not held hostage by the structural impediments evident in Gigaba's mini-budget.

It is our hope and expectation that between now and the national budget in February 2018, Minister Gigaba will find space to map out a credible way forward, supported by business, civic society and labour.

To put the South African economy back on track will be a collective effort, judging by the scale of the fiscal hurdles now facing the country. To do otherwise will ensure that at each and every turn, prosperity and a decent life will continue to elude the majority of South Africans because of the policy choices that stand in the way of more investment, innovation and entrepreneurship.

Visit www.jcci.co.za for more information

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