Finance Minister revises SA’s economic growth down to 1.5%

Posted On Wednesday, 21 October 2015 18:27 Published by
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National Treasury has revised downwards South Africa’s economic growth to 1.5%.

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“The Medium Term Budget Policy Statement [MTBPS] projection is that the economy will grow by about 1.5% this year, rising marginally to 1.7% next year,” said Finance Minister Nhlanhla Nene on Wednesday.

In the February budget, Treasury had projected growth of 2% for 2015.

“This is considerably lower than at the time of the February budget when we envisaged 2% this year and 2.4% in 2016. The International Monetary Fund also projects a decline in growth next year,” explained the Minster as he tabled the 2015 MTBPS in Parliament.

Falling commodity prices and electricity supply constraints and lower confidence levels have resulted in growth forecasts being revised lower.

Investment growth is projected to be at 1.2% this year with limited employment growth and household income constraints holding back consumption.

Consumer Price Inflation (CPI) has declined from 6.1% in 2014 to a projected 4.8% this year. Higher food prices and the weakening of the rand are expected to contribute to a rebound inflation to around 6% a year over the period ahead.

Investment

The public sector has sustained high levels of investment, with over R800 billion of infrastructure spending projected over the medium term in energy, transport and social infrastructure.

“For example, a greater role for private finance as a complement to public funds in social provision will also be explored in the housing, tertiary education and health sectors,” said the Minister.

In response to a question of the private sector not being able to invest because of the slow roll-out of the government’s infrastructure programme, Minister Nene said: “The concerns range from some of the bottlenecks … and also of the nature of our investment programmes ... It is for that reason that we’re saying we need a dialogue between the private sector and government.  A number of instances where we’ve had such, we’ve seen progress.

“We’ve reached a point where we need to be specific on issues of where the private sector sees red-tape and bottlenecks and those can be dealt with,” explained the Minister at a media briefing ahead of the tabling of the mini-budget.

Revenue

Meanwhile, National Treasury adjusted downward revenue estimates as a result of the slowdown in economic activity. Gross tax revenue has been revised down by R6.7 billion in 2015 and by R35 billion over the three-year period.

“Revenue has nonetheless held up well since the 2008/09 recession. This signals both the resilience of our tax policy framework and continued strength of tax administration,” said the Minister.

Over the medium term, government will continue to explore reforms that promote an efficient and progressive tax system.

“I have asked for further advice on wealth taxes,” said the Minister.

Infrastructure

State-owned companies continue to roll out infrastructure. Projected capital investment by Eskom to expand electricity generating capacity totals R157 billion over the medium term and includes the Medupi and Kusile power stations to augment generation capacity, and strengthening of the transmission and distribution grids.

Transnet’s R336 billion investment programme continues to expand rail infrastructure and renew rolling stock. Transnet recently secured R2.8 billion from development bank KfW to finance construction of 240 electric locomotives, and R30 billion over 15 years from the China Development Bank to finance a joint locomotive build project.

Large cities are building modern rapid transit systems and upgrading commuter rail services.

In order to promote inclusive economic growth, government is working with cities. The R20 billion Cornubia project in eThekwini will include 25 000 residential units and 1.4 million square metres of commercial space. A 12 ha commercial hub is under construction and has already been sold.

Construction began on Saldanha Bay’s liquefied petroleum gas terminal in February 2014, and civil works to support the 13.2 million barrel commercial crude oil blending and storage terminal began in 2015. In Cape Town, construction of the R660 million Burgan fuel storage facility should get under way soon.

Port infrastructure upgrades of R9.7 billion have been announced to support trade and large-rig repair. Public-private partnerships were invited and projects should be commissioned by December 2017.

The health Phakisa identified interventions to raise standards of primary health care clinics.

Last modified on Thursday, 22 October 2015 12:14

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