S.Africa’s slow growth prompts budget re-prioritisation - CNBC Africa

S.Africa’s slow growth prompts budget re-prioritisation

Southern Africa

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Minister Pravin Gordhan, President Jacob Zuma and finance minister Nhlanhla Nene. PHOTOS: GovernmentZA/Executive Government

“In order to sustain the expansion of budgets over the longer term, it is essential that we rebuild the momentum of growth in South Africa. Faster growth in the years ahead is both a key objective of the National Development Plan and the medium-term strategic framework and a necessary condition to unlock the resources needed to implement our plans,” Nene said at the 17th Southern African Internal Audit Conference.

He added that the National Development Plan (NDP) in particular was instrumental in addressing South Africa’s domestic challenges, but stabilising the growth of debt and restoration fiscal sustainability is essential to achieve before the smooth rollout of the NDP.  

The medium term strategic framework (MTSF) is government’s implementation programme for the first five years of the NDP.

Since 2011, according to World Bank figures, South Africa’s GDP has been on the steady decline. By 2013, GDP growth had declined significantly to 1.9 per cent, and is currently at 2.0 in 2014.  

(READ MORE: S.Africa's 2014 economic growth seen below potential)

2014 has been a particularly harrowing year for South Africa in the form of platinum mine strikes, which rapidly pulled down economic production and mining company profit margins.

Despite the five-month strike having been resolved, estimates are that it will take over a year until platinum mining firm regain losses incurred from the strikes.

Added to South Africa’s weak economic growth is rising consumer inflation, which is currently at 6.6 per cent and well above the South African Reserve Bank’s target band.

(WATCH VIDEO: S.Africa's June headline inflation treading water)

Nene added that due to limited resources, the proprieties and programmes in the MTSF will be financed by shifting resources away from less urgent uses. This is from a budget of one thousand million rand.

“The growth of the South African economy is not sufficient to address our challenges of poverty, inequality and unemployment,” said Nene.

“Government is working hard to improve the business conditions. We recognise that improving business conditions requires not only releasing the current supply side constraints but also improving policy alignment and policy certainty.”