In his 2016 National Budget Speech, Finance Minister Pravin Gordhan maintained an optimistic view, though warning that there will be tough times ahead.
He emphasised that the resilience and creativity of South Africans will be enough to overcome the current economic challenges.
The support and development of businesses was discussed in his speech, specifically around its contribution to the growth and development of the economy. Here are some of the top highlights.
South Africa’s economic outlook
SA’s economic growth has been lacklustre in 2015, falling short of government’s expected growth rate of 1%.
In his speech Finance Minister Pravin Gordhan admitted that growth rates of below 1% fall short of improving employment and reducing poverty and inequality.
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The Treasury has had to adjust its expectation to 0.9% growth in the economy in 2016, this is a result of both depressed global conditions and the impact of the drought.
Possible economic turnaround
Finance Minister Pravin Gordhan urges: “We are resilient, we are committed, we are resourceful. We know how to turn adversity into opportunity.”
If South Africa can build confidence and make the right choices an economic turnaround is possible.
Here are emphasised sectors and areas of potential growth within the economy:
- Business services, tourism and communications services continued to thrive over the past year. These industries are contributing positively to job creation.
- Agricultural output has declined due to the severe drought. But there is still a strong growth in several export products such as nuts, berries, grapes and both deciduous and citrus fruits.
- Export growth by volume was over 9% last year. This will continue to benefit the competitiveness of the rand. South African exports to the rest of Africa now measure more than R300 billion a year.
- Retail trade in the last quarter of 2015 indicated 4% growth. This signals that consumers remain resilient despite waning confidence.
- New investments of over R20 billion to take place in the automotive sector.
Continued growth and development
There is a need to address institutional and regulatory barriers to business investment and growth. Sectors and industries where South Africa has competitive advantage need greater emphasis. Businesses must be bold where there is a need for structural change and innovation.
Finance Minister Pravin Gordhan believes: “We are resolved to restore the momentum of growth, to ensure that it is inclusive and sustainable, and to preserve our economy’s investment-grade status.”
Listening to business leaders
Government has recognised the importance of engaging with business leaders and have actively been engaging with them to understand their views and concerns, reinforcing confidence and understanding.
Minister Gordhan recognises these engagements as critical to boosting the SA economy. He believes that these engagements will need to include regional forums and stakeholders.
“By removing constraints, supporting innovation, protecting jobs, diversifying our economy and exploring new opportunities, we can expand growth prospects,” Finance Minister Pravin Gordhan explains.
Several practical proposals come out of these engagements. These include a new fund to accelerate small and medium enterprise development and measures to build up investor confidence and aid social cohesion.
Business support for investors and SMEs
Steps are being taken to reduce the regulatory burden for business investors. This includes the establishment of Invest South Africa as a partner of the private sector. Additionally, there will be an intensive effort by cities to reduce administrative costs of starting a business.
A review of business incentives is also in progress. This will strengthen the incentives impact on growth, productivity, trade and competitiveness.
The Department of Small Business Development will receive R475 million and, with this prioritisation of funds, small and medium enterprises should expect greater assistance from government.