Standard Bank urges speedier reforms to kick-start economic growth

Standard Bank praised the South African government’s decision to pare back spending in this week’s budget update while calling for the speedier implementation of reforms to kick-start economic growth. 

In his medium-term budget policy statement on Wednesday, Finance Minister Enoch Godongwana announced plans to cut expenditure by R213 billion relative to February allocations over four years, raise new debt and increase taxes to offset a revenue shortfall.

The budget deficit is projected to reach 4.9% this fiscal year, up from a previous estimate of 4%. 

The speech was well received by investors, as evidenced by a strengthening of the rand and the stock market, and a drop in bond yields, Standard Bank’s CEO Sim Tshabalala said in an interview with Bloomberg TV from New York. 

While the government is working with business leaders to tackle energy shortages and logistical constraints, there’s a need to accelerate other structural reforms that have the potential to increase the economic growth rate to as much as 3%, create jobs and stoke investment, he said.

Those include measures to ensure there is better access to the telecommunications spectrum and water and that crime and corruption are dealt with more effectively. 

The mid-term budget envisions Africa’s most industrialized economy growing 0.8% this year and 1% in 2024. 

Despite the lacklustre outlook, Standard Bank, which is based in Johannesburg and is the continent’s biggest lender by assets, is considering options to grow its share of its home market — a major contributor to its bottom line.  

“We want to retain our dominant position in South Africa in the various product sets and customer segments where we are dominant — foreign exchange, trade, global markets, transactional products, home loans, vehicle-asset finance,” Tshabalala said. The bank is also eyeing growth in the rest of the continent, especially in East Africa, which has benefited from increased integration and has more than 500 million people.

“Throughout the last 20 years, they’ve grown at about 5%, and there’s no reason to believe why they will not continue to grow at those levels,” he said. “That’s a region that you want to be part of.”