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Finance Minister Tito Mboweni has vowed to unearth fiscal opportunities even while South Africa faces challenges posed by the Covid-19 coronavirus pandemic.
Mboweni briefed the media on Tuesday regarding the country’s economic outlook and said he was hopeful of South Africa’s economic opportunity in the long-term.
Even though the country’s economic outlook was recently downgraded by two rating agencies – Moody’s Investors Service and Fitch Ratings – as well as the continued downward spiral of the rand, the National Treasury was aware the country could benefit from the damage done to both global and local markets.
Disruption caused by the virus is starting to ripple through emerging markets. After showing little movement early this year, the latest indices from purchasing manager surveys are pointing to sharp slowdowns in manufacturing output in many countries, reflecting drops in external demand and growing expectations of declining domestic demand.
On a positive note, Mboweni said improvements would begin to take place. To ensure that the country benefited, the Treasury was currently working on “phase two” of its economic interventions to aid the country in weathering the coronavirus lockdown, and the impact of the prolonged closure.
He said “phase one” of the country’s economic policy responses, which were enacted after the announcement of the lockdown last month, had cushioned the country from a serious fiscal impact that would have been the case had there not been any measures put in place.
Mboweni praised “the immediate release of funds to where they were needed”, and the Treasury instituting a Municipal Finance Management Act Circular 100 for municipalities and municipal entities, to speed up the procurement of goods/commodities required to reduce and control the spread of the virus.
He said having taken lessons from this speedy implementation of economic interventions the Treasury had also drawn up a second phase.
This “phase two” would include a revision of the country’s fiscal framework to take into account the impact of Covid-19 on the fiscus.
- Putting forward clear estimates of the additional healthcare costs that will be needed;
- Reprioritising unnecessary expenditure towards these healthcare costs;
- Assessing the impact of the slowdown on projections for revenue;
- The response should be costed as much as possible to determine how much is needed;
- The response should be temporary – with a clear timeline of one year;
- The response plan must be crafted as a third line of defence for the vulnerable;
- Providing a clear timetable or plan to stabilise debt over the current forecast period; and
- The response plan must be supported by an economic recovery plan (structural reforms) and a set of reforms within the fiscal system, such as passing the road accident benefit scheme, consolidation of public entities and closure of SAA and SA Express.
“Together with my colleagues in the economic cluster, have put together a few proposals on how we can further grow the economy,” Mboweni said.
He added that these proposals would be presented to the Cabinet tomorrow and the outcomes would be detailed following the meeting.
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