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XINHUA NEWS SERVICE REPORTS FROM THE AFRICAN CONTINENT

 

Economic experts welcome progressive South Africa’s 2017 budget

By Ndumiso Mlilo JOHANNESBURG (Xinhua) -- South African experts have welcomed the 2017 budget as progressive in the current challenges facing the country.

The budget was presented to the Parliament on Wednesday by the Finance Minister Pravin Gordhan.

Lumkile Mondi, Senior Lecturer, Witwatersrand School of Economics and Business Sciences told Xinhua on Thursday that the finance minister tried his best to balance the budget under prevailing harsh economic conditions.

Gordhan predicted a growth rate of 1.3 percent this year from a 0.5 percent last year. The government intends to reduce spending by 2 billion U.S. dollars in the next two years.

The government debt is 169 billion U.S. dollars which is 50.7 percent of the GDP. Gordhan said the interests from debt are raising the expenditure which the government is trying to reduce.

Mondi said, “The tone of the minister is encouraging as he talked about inclusivity. He was saying we are together in this. He maintained fiscal consolidation by saying we spend what we have. He is trying to address the economic problems using the resources we have.”

The government intends to raise 2.2 billion U.S. dollars through taxes. The budget deficit is expected to be 3.1 percent of the Gross Domestic Product (GDP) in line with the government’s fiscal consolidation commitment.

The government is trying to reduce expenditure through stabilizing the public service wage bill. Mondi said there was a small room for the finance minister to maneuver and he had to walk a tight rope of trying to balance the interest of many people.

Mondi said, “The global economic forces are anti-growth and we need a leader who can address structural changes in our economy. The finance minister is trying hard with other stakeholders even to sell the country to the world. He is trying to encourage investment by also not increasing corporate tax.”

The finance minister mentioned transformation 50 times in his speech. This follows President Jacob Zuma’s call for the radical economic transformation during the State of the Nation Address this month.

Lesiba Mothata, chief economist of Investment Solutions also welcomed the budget as being progressive. Mothata said the world has seen weak economic growth in the last eight years and that influenced the finance minister in coming up with the fiscal consolidation.

Mothata said Gordhan is also faced with the task of ensuring that there are funds for capital expenditure like the infrastructural projects done by the State Enterprises.

Mothata said the finance minister’s budget come at a time when there is inequality and low business confidence.

He said, “The minister was faced with complex issues and world economic dynamics but there is a commitment to infrastructural spending through revenue coming in. Gordhan left the economic growth to the markets. What’s key on the budget is investment and he tried to balance the books.”

The finance minister said the state enterprises have a critical role to play in infrastructural projects. Their borrowing needs will be accommodated in the fiscal framework.

Mothata said across the world there is a call to have inclusiveness hence the need for economic transformation.

The economist said the government should consider concentrating on micro economies like the township economic developments. The economic growth should not be concentrated on big towns but include the peripherals.

First National Bank Economist Mamello Matikinca also said the budget is promising. She welcomed the awarding of huge budget on education saying the youth needs to be skilled to contribute positively to the economy.

She also welcomed the budget’s identification of tourism as a potential contributor to the economic growth and Agriculture after the 2016 drought. 

Matikinca said, “The focus of the budget is optimistic. The minister has done an incredible job to avert the country’s downgrade and the budget is also a step in that direction.”

She, however, called for more private sector participation and improvement in the country’s competitiveness.

A tax expert, Kyle Mandy, partner and head of National Tax Technical at PwC South Africa, welcomed the introduction of a 45 percent for those with taxable income of 116,000 U.S. dollars.

He said the tax will help revenue shortfalls. He, however, warned that the higher taxes are becoming too high to cause some high earning professionals to move to other countries.

He also praised the finance minister, saying “We are on the right path on fiscal consolidation and spending within our means. The minister is doing a sterling job to keep us in the right direction. Had it not been for Treasury we could be like Greece.” 

 

             

 

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