Finance Minister Enoch Godongwana outlined three things that must be fixed to grow the South African economy – stable policies, structural reforms, and improved state capability.
However, Pieter Faber, a senior executive at the South African Institute of Chartered Accountants (SAICA), said the government is failing to implement these fixes.
In the decade before the Covid-19 pandemic, from 2010 to 2019, South Africa averaged an economic growth rate of 1.87% per annum.
This is on par with South Africa’s population growth rate during the same period, which means South Africans, in real terms, got poorer over that period.
Over the same period, the country’s unemployment rate skyrocketed to 25.5% and rose to 32.7% by the end of 2022.
In its budget review, the National Treasury stated three things that need to be fixed to stimulate economic growth and increase employment in South Africa.
Faber said that while the government has the right ideas, it fails to implement them.
1. Stable macroeconomic policy
A stable macroeconomic policy is vital for investment as it provides certainty for businesses that need to understand the environment in which they operate.
However, according to Faber, the government’s macroeconomic policy is unstable and not achieving its stated aims of growth and employment.
South Africa has had eight macroeconomic policy frameworks in the last 25 years. It also has two different frameworks in operation – the National Development Plan from 2012 and the Economic Recovery Plan from 2020.
There is also no clear plan on critical issues, such as the turnaround plans at Eskom and Transnet and how to increase youth employment.
2. Structural reforms, particularly in the energy and transport sectors
Regarding structural reforms, the government is quiet on plans to improve the performance of Transnet’s rail and ports.
According to Faber, the government is heavily focused on electricity generation and possibly to the detriment of other issues.
Another failure is that the government does not implement its stated reforms. Currently, it is just talking, and “talk is cheap”.
Faber said, “Are they fixing it? Is the policy indicating that? The answer is no.”
3. Improved state capability to provide adequate service delivery
Concerning state capability, Faber said the government launched a plan to professionalise the public service in 2020.
Professionalisation is not occurring with municipalities failing to provide essential services. People are increasingly suing municipalities for not supplying adequate services.
The National Treasury is in a difficult position, said Faber, as a lot of the execution is not up to them but to the other 41 ministers and deputy ministers.
The Treasury is limited to making plans and enforcing financial discipline. However, it is failing in its duty as the financial custodian as it is not disciplining municipalities financially.
Municipal debt owed to Eskom has been increasing steeply recently with minimal intervention from Treasury.
Moreover, they must withhold funds from municipalities if they receive a qualified audit opinion. Faber points out that not a single municipality has had its funds withheld following an adverse audit opinion.