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Budget Speech 2016

South African economic outlook

 

 

Fellow South Africans, growth rates of below 1 per cent fall short of what we need to create employment and reduce poverty and inequality. The Treasury currently expects growth in the South African economy to be just 0.9 per cent this year, after 1.3 per cent in 2015. This reflects both depressed global conditions and the impact of the drought.

 

It also reflects policy uncertainty, the effect of protracted labour disputes on business confidence, electricity supply constraints and regulatory barriers to investment.

 

However, the institutional foundations of our economy remain resilient:

 

• Macroeconomic policy is effective,
• The inflation targeting framework provides an anchor for price and wage setting,
• Our banks and financial institutions are well-capitalised, and we have liquid rand-denominated debt markets,
• The architecture of our Constitution, justice system, public and private law and dispute resolution mechanisms is robust,
• We have excellent universities and research centres,
• We have a strong private sector,
• We are a resourceful people, committed to contributing to a better South Africa.

 

Mr Raymond Wesley wrote to me as follows: “As South Africans, we don’t have an appreciation of the strides we’ve made. Minister, show South Africans, especially the rich, that people’s lives have changed for the better.”

 

This is true, yet there is more to be done.

 

We are resilient, we are committed, we are resourceful. We know how to turn adversity into opportunity.

 

In the numbers, Honourable Speaker, there are indicators that an economic turnaround is possible if we build confidence and make the right choices.

 

• Business services, tourism and communication services continued to expand over the past year, contributing positively to job creation.
• While overall agricultural output has declined under severe drought conditions, there has been strong growth in several export products: including nuts and berries, grapes and both deciduous and citrus fruits.
• Overall export growth by volume was over 9 per cent last year, and will continue to benefit from the competitiveness of the rand. South African exports to the rest of Africa now exceed R300 billion a year, up from about R230 billion just three years ago.
• Retail trade data for the last quarter of 2015 indicate growth of over 4 per cent in real terms, signalling that consumer spending remains buoyant despite declining confidence.
• Investments amounting to over R20 billion have recently been announced in the automotive sector.

 

Yet our economy is not growing fast enough to raise employment or improve average incomes, Honourable Speaker. Investment growth must be substantially scaled up.