Business

Mboweni: The economy is at a crossroads

2018-10-24 14:06

Finance Minister Tito Mboweni in his first budgetary statement described South Africa’s economy at being “at a crossroads”.

Mboweni, who has been in his post for just over two weeks, made this statement today amid an economy that is in recession and unemployment that is “unacceptably high”.

He started his maiden medium-term budget policy statement, which charts government finances over three fiscal years, in Parliament in Cape Town by quoting from A Tale of Two Cities by Charles Dickens: “It was the best of times, it was the worst of times … we were all going direct to heaven, we were all going direct the other way.”

“For ordinary South Africans, it has become a difficult time. Administered prices, such as electricity and fuel, have risen. Unemployment is unacceptably high. Poor services and corruption have hit the poor the hardest,” Mboweni, who was South African Reserve Bank Governor for 10 years to 2009, said.

“Together, as a country, we can rebuild and recast our future,” he added.

Tito Mboweni delivered a sober medium-term budget policy statement on Wednesday (October 24 2018). Picture: Lerato Maduna/Foto24/Gallo Images

 “We must choose a path that takes us to faster and more inclusive economic growth and strengthens private and public sector investment. We must choose a path that stabilises and reduces the national debt. We cannot continue to borrow at this rate,” he added.

Mboweni said that the South Africa Revenue Service (Sars) urgently needed to be fixed.

“It is a matter of public record that the capacity of Sars has been weakened. It is in this context that the Sars leadership team must be strengthened,” he added.

The affairs of Sars are being probed by the Sars Inquiry headed by retired Judge Robert Nugent while Sars commissioner Tom Moyane is suspended. Nugent has recommended to President Cyril Ramaphosa that Moyane be removed from his post due to the damage he has wrought on Sars.

Together, as a country, we can rebuild and recast our future
Finance Minister Tito Mboweni

The economic forecasts from the budget in February “have not materialised”, Mboweni said.

Ramaphosa announced previously that R50 billion in government expenditure would be reprioritised. Mboweni announced that R15.9 billion of the reprioritised money would go towards infrastructure programmes, supporting industrialisation and expanded public works.

“An additional R16.5 million of reprioritisation will be allocated to various programmes, including funding to restore capacity at the South African Revenue Service,” he added.

“Our reprioritisation efforts will support the [Land] Bank to conclude transactions worth R16.2 billion over the next three to five years that will create jobs in agriculture. A significant portion of the funding will go towards export-oriented crops that are highly labour intensive,” Mboweni said.

He referred to the Giyani water project as being “plagued by malfeasance. It is a cesspool of corruption”.

“The President [Ramaphosa] has informed me that he will go to Giyani to see exactly what has happened and what needs to be done,” Mboweni said.

Turning to another water issue, he said that the government was decisively and urgently dealing with the water crisis in the Vaal River System.

When it came to value-added tax, Mboweni said that as of April 1 2019, the government would zero rate the following items: sanitary pads, bread flour and cake flour.

The President [Ramaphosa] has informed me that he will go to Giyani to see exactly what has happened and what needs to be done
Finance Minister Tito Mboweni

“The revenue loss associated with zero-rating these items is estimated at R1.2 billion. However, zero-rating these products targets low-income households and restores the dignity of our people,” he added.

On the topic of carbon tax, Mboweni said that: “We have heard the concerns of business and labour during the parliamentary hearings. The carbon budgeting system and the carbon tax will be aligned. This is done by imposing a higher tax rate as a penalty for emissions exceeding the carbon budget.”

Carbon tax was set to be implemented on January 1 2019, but this would be postponed to June 1 2019, he added.

Read Mboweni's  entire budget policy speech here:


Justin Brown
Business editor
City Press
p:0117139001
w:www.citypress.co.za  e: justin.brown@citypress.co.za
      
 
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June 16 2019