finance
After the Budget Speech: An outlook for South Africa’s economy Tito Mbowani set out South Africa’s budget proposal on 26 February. At that time, the world was just getting to grips with COVID-19 virus; since then, the world’s economy has been in freefall. Amid all that is happening, as we go live with Property Review, we still need to remember the budget and what it requires us to do as we go through the lockdown and come out on the other side By Mark Pettipher
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ollowing the Budget Speech, SAPOA Western Cape hosted a Post-Budget Breakfast sponsored by Growthpoint Properties at the beginning of March, where Brian Kantor took us through parts of the speech and outlined that South Africa’s economy is in dire straits. Later that month I travelled to Mbombela to attend another Post-Budget Breakfast, this time sponsored by Halls Properties, Nedbank and WDT Attorneys. Here the keynote speaker was Nedbank Chief Economist Nicky Weimar. The two speakers could have been reading off the same “song sheet” when it comes to the way they described the state
Since 2012, we’ve been sliding downwards.
of South Africa’s economy. They spoke about how things were relatively okay from an economic growth perspective up until 2008. The GDP graph shows us that as Jacob Zuma took over the presidency in May 2009, the economy took a tremendous hit, down to 0.5%. There was a modest period of growth around 2014 at an average of 2.8%, but since then the economy has continued –as Weimar put it – a slow, steady decline to 0.9%. “What can the future bring us, and where will the growth come from? Can government drive growth and job creation? The short answer is no – because they are out of money,” said Weimar. “They have been running budget deficits of more than three percent of GDP for more than a decade, and have estimated that they will be running at less than -4% this year. What this means is that they have been running a shortfall, and have to borrow more to finance a consistent shortfall. Government debt, which used to be 30%, will rise to just short of 60% in 2022. If you add the debt of state-owned enterprises, the government is actually closer to 80%. The danger is that they have to borrow more money just to pay the debt. “The government needs to contain and slow this debt accumulation. They can make sure that there is policy certainty to create an environment for the private sector to thrive.” Weimar predicted that the South African Reserve Bank would cut interest rates. She was proved correct: 100 basis
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