Finance Minister will need a magic wand to help deliver a budget this week capable of fulfilling SONAs promises

Finance Minister Enoch Godongwana will need a magic wand in his briefcase to help deliver a budget this week capable of fulfilling President Cyril Ramaphosa's State of the Nation promises. 

There is simply not enough tax revenue to give immediate effect to Ramaphosa's wishful thinking, in particular the President's projected 3% GDP annual growth.  

The correct budget priorities, however, could well put the country on a growth trajectory, with increasing tax revenue, job creation, and social development spending. 

The Cape Chamber has a shortlist of key state interventions requiring urgent attention  -- and budget commitment – ahead of the Minister's Budget Speech. Investment in these areas would pay dividends in terms of Ramaphosa's stated priorities: 

Here is the Cape Chamber's shortlist:  

1. Develop, resource and implement an effective industrial strategy (by working closely with the private sector). This strategy must be informed by political choices that prioritise a small number of global value chains where South Africa already has some competitive advantage – which can be further strengthened through substantial and meaningful government financial investment and other support. Currently, we have too many Master Plans that do not constitute an industrial strategy, are not prioritised, and are not meaningfully supported by a capable state that is able to partner with the private sector to grow our exports and the broader economy.  
      
2. Develop, resource and implement an effective export promotion strategy to meaningfully grow exports in our priority value chains as identified in the proposed industrial strategy. Such an export strategy would identify and work with our leading firms in these value chains to identify their specific export constraints. Once action plans are developed and implemented to address constraints, we can expect to see these lead firms investing in their expansion and in the expansion and growth of vast networks of suppliers and small businesses throughout the South African economy. This is the quickest and most effective way to grow small business in South Africa- by ensuring our lead firms can grow by expanding their exports. If our lead firms are not growing, our small businesses will not grow.  
   
   A better understanding of these market realities would help realise the President's ambitions of growing the economy. 
    
3. Build a capable state by ensuring the public sector is led and managed by effective senior management.  This includes local government, where experienced officials in senior local government positions could address key gaps in financial management competencies and engineering competencies. 
   
   Corrupt and non-performing officials need to be held accountable and rooted out of the system.   
    
4. Reduce crime, which remains a massive obstacle to business success. Government appears content to pay lip service to corruption within its ranks, but where are the convictions to reassure potential investors that State Capture is behind us?   
   
   Confidence in the police urgently needs to be restored. The very institution mandated to keep us safe and secure is not doing so, and we seem to be getting used to it. We need a competent and capable police force that is stronger than the adversaries they face.  
5. We need to ensure a future pipeline of capable skills to meet the needs and demands of both the private and public sectors.  The current skills training system is not market-led, controlled by government-appointed officials that are largely ineffective. Vocational institutions can be transformed by adding a number of private sector board members to guide them towards fit-for-purpose skills development.  
   
   A fundamental review of the SETA system is also required, to fix its many flaws. 

In our view, spending on the abovementioned priorities would accelerate economic growth by improving government efficiency, developing skills, and attracting much-needed investment. 

However, strategic spending will not be enough to deliver Ramaphosa's SONA promises; it will also require cost-cutting. If Godongwana does procure a magic wand for his Budget speech, we hope he waves it to fix the following problem areas which were flagged recently by the Bureau for Economic Research:   

1. South Africa's fragile power supply. Reversing the costs on the economy of load shedding will take time, if in fact reversable as amongst others stability and continuation are not assured. In addition, serious governance issues at Eskom, as raised by the latest Auditor-General report does not inspire confidence that over a long-term investment horizon that South Africa will be assured of a constant and affordable electricity supply. 
2. Eskom indebtedness.  In addition there is growing outstanding municipal indebtedness to Eskom with no credible practical turnaround steps, which makes Eskom's current fragile situation much worse. 
3. Weak municipal governance (financial, corporate and functional), whether related to day-to-day governance, properly functioning utility services (water, sewage, waste management, etc), roads, spatial matters, etc collectively worsens investment opportunities/confidence.  
4. Continuing export choke points, whether via rail or ports. Transnet is a crucial player. Urgent intervention is required to improve its performance and help drive economic recovery. 

Ramaphosa's SONA list of business-friendly promises was at least longer than his list of unfriendly ones.  In particular, we welcome his emphasis on the need for a capable state and a revamped logistics sector. We also welcome his focus on future Public Private Partnerships (PPPs) which will be key in delivering much-needed infrastructure development. 

The only way to turn Ramaphosa's  SONA fantasy into reality is to get an investor-friendly budget in place to generate growth and bolster Government coffers.

Jacques Moolman
President of the Cape Chamber of Commerce and Industry