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Finance Minister Nhlanhla Nene has admitted that leaders in government could have done more to shore up business confidence, which has been pegged at its lowest level in 16 years.
Speaking to City Press this week, a day after returning from the G20 meeting of finance ministers in Turkey, Nene admitted government had not done enough to instil business confidence among local and foreign investors.
He said more engagements between the private sector and government were needed to allay fears business may have about the country’s economic prospects.
But Nene was also quick to put some of the blame at the door of the private sector, which he said lacked constructive criticism about the country.
“We should admit that, as the leadership, we should be doing our bit because, at the end of the day, we are the leaders of society and have a responsibility to inspire the confidence that is required. But the confidence we are talking about is not just the confidence that has to do with the leadership, but the environment in which the private sector operates too,” said Nene.
All South Africans were also partly to blame for low investor confidence, he said.
“We all have a role to play in improving things wherever we are. Firstly, you’re in the media space, and unless you sell your country where you are, do not expect any investment to be coming your way if you, yourself, are uncomfortable.
“The private sector has actually found it easier to do business in South Africa than it did under apartheid. Perhaps they were comfortable at that time because they had been working with that government for a considerable amount of time. As things stand, the major players in our economy, like the mining industry, are confronted with challenges both domestically and externally. Even if we address the energy challenge, there’s still another challenge of falling commodity prices, so you do expect those people to be uncertain about the future,” added Nene.
At the G20 meeting, other finance ministers also pointed to uncertainty in business, said Nene, an indication that confidence levels were low in most economies.
“The uncertainty of business is not unique to South Africa. I just returned from the G20 in Turkey, and there’s uncertainty everywhere because of the economic environment, but we have a duty also in the country to allay those fears. To do that, we need more opportunities to work together,” said Nene.
Amid a tumbling rand, a growing deficit, increasing unemployment levels, job losses and an energy crunch that has contracted the country’s economy, Nene singled out the country’s slow economic growth as the one thing that gave him sleepless nights.
He urged business to take advantage of opportunities presented by international partnerships that South Africa had in multilateral forums such as the G20 and Brics (Brazil, Russia, India, China and SA).
With Stats SA figures indicating that youth unemployment soared to a six-year high in June, Nene said young people should start their own businesses.
“We need successful small businesses because we don’t have enough young enterprising individuals – people who wake up every morning and dream of an idea that would generate income, create jobs and provide them with sustainable livelihoods at all levels.
“The issue of a lack of skills is critical, but in addition to that, it’s building on small, medium and micro enterprises. I think our light at the end of the tunnel lies there. It is clear even in our tax collection that we are now seeing a lot of revenue coming from small rather than large businesses,” he said, adding that opportunities were opening up in agriculture.
“That means we have a future for this country, and opportunities can be best explored by young individuals. As government, we are playing our part with the new dedicated department of small business development. I think that can make a huge difference to our economy.”
Though Nene has not ruled out a rise in VAT in the near future, he said discussions regarding the Davis tax committee’s recommendation to hike VAT to 18% were ongoing, although he did not seem to be keen on the move.
“There’s been talk by the labour movement of taking to the streets to stop the implementation of [a higher] VAT [percentage]. We all know VAT is one of those regressive taxes and it is for that reason that perhaps we should have introduced it, but administratively it is another burden when zero-rating some [goods]. Once you have a VAT like that, it becomes very difficult to administer. That said, it doesn’t mean that any form of [new] taxation is off the table,” said Nene.
