Cape Town - The numbers in budget 2015 show it could be the first time government is more pessimistic about economic growth than the private sector, according to economist and political trend analyst JP Landman.
"Before the budget announcement the private sector predicted economic growth of 2.3% for SA. For me Finance Minister Nhlanhla Nene, therefore, dropped a bombshell with his estimate of 2% for 2015," Landman said at a post budget event presented by Deloitte in Cape Town.
Nene also predicted economic growth of 2.4% for 2016 and 3% for 2017.
"He blames the economic growth challenge on the electricity crisis, but does he think, with an estimate of 3% growth in 2017 that the electricity crisis will be over by then," asked Landman.
He said the most important thing Treasury must do is to protect the credibility of the sovereign, because when that is lost, capital development will not happen.
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"With this budget we had to keep the rating agencies at bay and to restore government's credibility as a sovereign.
The question of government debt, therefore, remains an important issue. Currently the debt to gross domestic product (GDP) ratio is below 45%. When Trevor Manuel became finance minister in 1996 the ratio was 48% and when he handed over to Pravin Gordhan he had brought it down to 23%.
"It is nonsense that Treasury is weakened. There is no question that the South African financial system can keep control by sticking to the numbers tabled in the budget," said Landman.
"The civil service bill and if state owned enterprises (SOEs) would need more money, would be the things that could upset the apple cart. It is a pity that minister Nene did not make an announcement about the privatisation of SOEs."
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He pointed out, however, he cautioned that it is easy to say cut the civil service, the question remains where to cut.
"Are you wanting to cut the number of police, teachers or nurses - because that is the biggest part of the civil service - or would you cut staff at Treasury or Sars?" asked Landman.
Landman said in his view it is safe to say that Treasury has managed in budget 2015 not to "soil" SA's reputation in the eyes of capital markets and now it must just try to provide some growth by means of innovation aimed at higher productivity.
An issue which he described as "a big fight in politics at the moment" is that SA needs a proper industrial policy.
Social grants
As for social grants, Landman said that although the number of recipients will increase to 17.1 million, it relates to only 3.1% of GDP, compared to 3.3% in 2006. The low economic growth in the country is, however, a factor to watch in this regard.
"Yes, SA's economic growth has slowed down and has to improve. Expect no miracles, but also don't expect an apocalypse either," said Landman.
"For business I can say that the days of easy money are over, but with more productivity and more innovation one can do it."
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