Deputy Minister of finance David Masondo has outlined some of the financial issues and opportunities currently facing South Africa.
Speaking at a JP Morgan event this past week, David Masondo, said that low economic growth, a high wage bill, and state-owned enterprises are some of the biggest issues weighing on South Africa right now. This he said, will require a close working partnership between government, investors, corporates and labour unions to find solutions to these challenges; and to implement these solutions.
Masonda, said the government is working on a number of growth enhancing interventions which would include, the new Integrated Resource Plan and also The Infrastructure Fund, which will mobilize both public and private-sector funding for infrastructure, which are being rolled out.
The visa regime of the country is being greatly simplified, he said and also the unabridged birth certificate requirement for minors visiting the country has been abolished.
The government has instructed ICASA to implement the licensing of broadband spectrum.
These and other interventions are expected to ease bottlenecks, create new opportunities for small and medium-sized businesses, and allow for greater investment in public infrastructure for the provision of services, he said.
Masondo said that growing the economy will require the increase of both foreign and domestic financial capital adding that the government should not compel asset managers to invest their clients’ money in unsound or poor-return projects.
Economic actors should also behave as South African ambassadors and send the correct message to international counterparts that South Africa is ready to do business with them, he said.
The Deputy Minister said that his department is working on a short-term intervention to stabilize debt caused by expenditure which will involve closing the gap between annual non-interest spending and annual revenues by 2022/23.
On ratings down grade, Masondo, said this will make things substantially worse by raising the cost of borrowing for government, SOEs and this will spill-over to private enterprises and eventually all borrowings across the economy. This will force borrowing costs, including for households to rise, causing a further decline in investment, he said.
He added that banks and corporations, faced with increased borrowing costs, will pass on this to consumers by way of higher interest /bank charges, cut back on lending, and cut back on investments.