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Land plans show higher state involvement - expert

Feb 21 2015 07:00
Carin Smith

Cape Town - The latest proposals on land reform in President Jacob Zuma's State of the Nation address show an increasing tendency toward higher state involvement, according to Sanisha Packirisamy, an economist at Momentum.

These proposals include pilot projects for farmland redistribution and an attempt to ban new foreign ownership of farm land.

"Traction on Project Phakisa, furthering initiatives in the mining and oil and gas sectors, amongst others, bodes well, but funding for large-scale infrastructure projects in line with the National Development Plan (NDP) remains questionable," explained Packirisamy.

READ: Presidency explains foreign land ownership plans

"While government announced that they are reviewing immigration policies, making it easier to attract foreign skills, this is not new and progress on a range of other NDP proposals remains slow."

She also pointed out that SA continues to struggle against peers in the Global Competitiveness Indicator rankings when it comes to infrastructure and goods and labour market efficiency.

"Without significant political resolve to drive reform, SA could remain a laggard against emerging market peers and faces further ratings risk," she warned.

READ: Zuma lost GPS signal on land ownership - business

Bloated public sector wage bill

"The ratings agencies have voiced concerns over SA’s bloated public sector wage bill, which has crowded out government capital spending in past years, further capping trend growth in the economy," said Packirisamy.  

"However, official jobs figures show that the rate of growth in public sector hiring has slowed significantly. Furthermore, the lower oil price feeding into lower headline inflation estimates this year provides Treasury with more breathing room for inflation-linked wage settlements."

Although, in her view, this will still be some way off the 15% the unions are demanding.

While the contingency reserve (an amount set aside to fund unforeseen spending pressures) has been drawn down, there is still a buffer of R5bn for the coming fiscal year, and R15bn the following year, which could be used to fund cost overruns.
 
"Following on from the State of the Nation address, the discussion around minimum wages may be on the agenda. The implementation of minimum wages looks increasingly likely as we near the 2016 municipal elections," said Packirisamy.

"But this could, in my opinion, have further negative repercussions on employment growth and inflation going forward."

ALSO READ: Rocky start to public service wage talks

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