Economy will get much worse
Durban - The economic future of South Africa lies in the hands of Finance Minister Pravin Gordhan who is to deliver his Budget speech this Wednesday.
This comes at a time when citizens are heavily burdened due to slow economic growth, the depreciation of the rand, and drought.
Questions have been raised by experts about whether Gordhan’s Budget speech will steer the country in the right direction or not.
Economists predicted that the tough economic times will not improve for some time. They said that borrowing was not an option due to the weakened rand and the need to narrow the budget deficit.
Economist David Shapiro of Sasfin said it was inevitable that taxes would be raised, causing further hardship for struggling South Africans.
“It is clear that the government is obsessed with their credit rating. Times are tough for commodity producers and we are experiencing the worst drought in decades which is pushing up the cost of food.
“The tax base has also diminished and we need to realise that the more we tax those that are producing, the more negative effect it has on growth. The only way to address the situation is to cut out waste,” he said.
Economist Dawie Roodt said cutting out unnecessary expenditure should be on the top of Gordhan’s list.
“We have been warning the government for many years to cut down and now we find ourselves in a mess. Measures, including an increase in taxation on big companies and high-earners, are expected to be announced in the Budget speech,” said Roodt.
He said we were unlikely to avert junk status, claiming it was on a slippery slope to recession.
“To recuperate the ailing economy, the government must fire all civil servants, including those working in state-owned enterprises, and start a fresh employment process. We need to employ qualified and competent people to revive our economy,” he said.
Owen Nkomo, the chief executive of Inkomo Investments, said he expected a “prudent” Budget speech.
“Gordhan should be rigid on managing the deficit in this year’s budget. A recession is looming if things are not handled properly,” he said.
Professor Dilip Garach of Garach & Garach Financial Advisory Services, said the South African Revenue Service (Sars) would be expected to enforce tighter measures in collecting revenue and closing loopholes.
“International corporates who use transfer pricing be-tween countries to reduce profit and pay less tax will be closely monitored. Sars always beats revenue targets and collects more money for the country,” he said.
“The government, business, labour and civil society must work together to create a better life for our people by eradicating poverty, eliminating in-equality and reducing unemployment,” he said.
Psychologist Dr Saths Cooper, said the financial crisis triggered the most stress for individuals.
“The serious economic downturn impacts on all South Africans resulting in anxiety and difficulties. Our country is in a severe state of economic insecurity and social uncertainty. Very little that will be announced in the Budget speech will help alleviate this sorry state of affairs. South Africans deserve better.
“South Africans will need to work harder at what they’re doing to ensure that they don’t slide into further debt,” he said.
But, the experts believe there is light at the end of the tunnel.
“There is always hope and to get out of these tough economic times, we need to work extra hard, we need to double our efficiencies. This applies especially to government departments… A vision of hope starts with us,” said Shapiro.