The National Treasury will be releasing an action plan soon that would outline the government’s measures to boost confidence and get the economy growing, Finance Minister Malusi Gigaba said on Monday.
“We will be announcing an action plan with timelines to implement certain structural reforms in order to boost business confidence and household consumption so that we can get the economy reignited,” he added at an event at the South African Revenue Service’s Orlando East branch in Soweto to launch the new tax season, which started on July 1.
The imperative to lift the economy is key because South Africa is in recession as the economy saw two consecutive quarters of negative economic growth during the half year ended March. Unemployment is also at a 13-year high of almost 28%, with millions of people without jobs.
“The action plan will be released after the ANC national policy conference ... It was drawn from 13 issues that have been raised with us consistently by investors and the rating agencies. It is extracted from the nine-point plan. It’s provides an action list for things to do and the timeline.”
There was a need to address the triple challenges of inequality, poverty and unemployment as well as building confidence in the economy, he said.
Ultimately, Gigaba said he would like to see the number of people employed increase and the number of people relying on social grants decreasing.
“We are in a difficult environment,” Gigaba said.
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Gigaba said that low growth couldn’t become a vicious cycle with no government spending, household spending, investments nor incomes.
“A lot of energy will be required [to get the economy growing]. Tough decisions on everyone’s part,” he added.
Deputy Finance Minister Sfiso Buthelezi said that during the three months that he and Gigaba had been at the National Treasury they had done a number of things to improve business confidence after listening to local business representatives.
One area was to ensure consistency of policy including that they wouldn’t change the budget.
Buthelezi said that the Treasury had had a void in the director-general post for too long and had appointed a director-general, Dondo Mogajane, who had 20 years experience at the National Treasury, and provided consistency.
He said that the treasury was continuously meeting with Business Leadership South Africa, Business Unity South Africa and the Black Business Council.
They had also engaged with international investors to get foreign direct investment into the country.
Another development that Buthelezi highlighted was the signing of the Financial Intelligence Centre Act into law.
They have also met with international rating agencies.
“This is all dealing with the trust deficit [between the government and business],” Buthelezi said.
SARS commissioner sticks to his goal
The South African economy was going through a technical recession and companies were shedding jobs, South African Revenue Service commissioner Tom Moyane said.
These developments had an impact on Sars’s ability to collect taxes but Moyane said he was still confident of about achieving the tax collection target set in February.
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“If the external factors contract our economy – we have a mountain to climb [to achieve the tax collection figure of R1.266 trillion],” Moyane said.
He also cautioned that the government’s forecast for GDP growth this year of 1.3% was looking like it would be reduced in line with international organisations like the International Monetary Fund and the World Bank as well as the South African Reserve Bank, which had cut their forecasts to well below 1%.
Gigaba said that he was “mindful of the state of the economy” and that the tax collection target of R1.266 trillion might not be reached.
For the tax of R1.266 trillion to be achieved, the “economy needs to be kicking”, he added.
Gigaba said that at the “mini budget” in October it would be announced whether the tax collection target had changed at all.
Referring to the bailout of SAA that was announced last weekend, Gigaba said that: “We have used money available in a fiscally neutral way. We haven’t affected the fiscal framework.”
There were conditions attached to the SAA bailout including that the airline needed to finalise the appointment of its new chief executive, he added.
“SAA over the years has bled skills in a very serious way. So there is a lot of work that the new chief executive will have to embark upon in order to rebuild the skills base of the airline.
“There is a letter than I am writing to the airline including a task team that I will establish to oversee the implementation of the turnaround strategy. So there are strict conditions,” Gigaba said.
Gigaba said that Dudu Myeni’s term as SAA chairperson would be ending in August.
“We will be taking measures to strengthen the board,” Gigaba said.
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At the mini budget in October, he said that he would be announcing how the Treasury planned to recapitalise SAA.
Gigaba said there was a plan to appoint an aviation specialist prior to SAA’s annual general meeting.
The board of SAA needed the aviation specialist to advise the airline’s board, he added.
“Urgent decisions need to be made at SAA,” Gigaba said.
Gigaba said that the decision by Standard Chartered not to extend its loan with SAA might show that the bank had lost faith in the airline but not in the country.
“The other lenders remain intact and are committed to continue supporting the airline. I’m in regular communication with them. The director-general was also talking to them one by one on Friday.”
“We would have wished that Standard Chartered would have stayed but there is nothing we can do. They wanted to leave. They still have investments in other areas of the South African economy. We remain confident that they are comfortable about the South African economy.
“We need to resolve the SAA dilemma – it has been going on far too long. I want the SAA issues to be resolved. I want that airline off my list of top priorities,” Gigaba said.
“South Africans are sick and tired of supporting SAA when the airline itself is not demonstrating a sense of responsibility,” he added.
“All state-owned companies need to address their governance challenges,” Gigaba said.
“We need to reduce the government guarantee framework.”