PRETORIA – Commenting on the budget proposals announced on Wednesday by South Africa’s Minister of Finance, Nhlanhla Nene, in Parliament, the President of the National Association of Automobile Manufacturers of South Africa (NAAMSA), Dr Johan Van Zyl said that against the background of challenging domestic economic and socio-political challenges, subdued economic growth, the energy crisis, an uncertain global economic outlook and pressure on fiscal resources, the Minister had presented a budget which sought to send a strong signal to investors and international credit ratings agencies that the South African government was serious about fiscal discipline and a reduction in the budget deficit going forward.
“The budget correctly recognised that South Africa urgently required stronger growth, faster employment creation and a narrowing of the current account and fiscal deficits. The restoration and improvement in domestic and foreign investor confidence represented an essential precondition in this regard. The commitment to expedite the implementation of the National Development Plan to facilitate growth and employment was another important feature,” said Dr van Zyl.
In a statement released yesterday, Van Zyl said whilst the nine strategic priorities for growth and development, identified in the budget, were important, the two most critical ones comprised the need for the early and effective resolution of South Africa’s energy challenge and the need to reduce workplace conflict and facilitate a more constructive industrial relations environment in South Africa. The poor economic performance over the past two years could in large part be attributed to the negative impact of widespread and prolonged industrial action in many sectors in South Africa.
In particular, NAAMSA welcomed the target of reducing the budget deficit progressively over the next three years, additional financial support and measures to drive industrialisation and manufacturing in South Africa. Manufacturing, including vehicle and component production, represented a key growth driver which could make an important and positive contribution to the SA economy and
employment creation. NAAMSA also welcomed the fact that there would be no increase in corporate taxation and the proposed tax measures to promote energy efficiency and manage demand for electricity. The organisation was also pleased with the additional funding for education and training as well as social development and assistance aimed at poverty alleviation.
“The increase in the tax burden as a result of higher income tax rates and the increase in the general fuel levy would impact on consumer spending and sentiment. However, to a large extent the higher tax burden would be offset by the one year relief measure in respect of Unemployment Insurance Fund contributions by employers and employees at substantially reduced levels which provided direct relief of between R15 billion and R18 billion to workers and businesses. Given the substantial surpluses built up by the Unemployment Insurance Fund over recent years, the one year relief measure should be manageable without affecting the long-term integrity of South Africa’s unemployment social security dispensation,” added van Zyl.
Van Zyl concluded that overall, the budget proposals, given the circumstances confronting South Africa at this juncture, appeared pragmatic and reasonable. “On balance, the budget should contribute positively to investment sentiment. Most importantly, government, labour, business and community should work together constructively to give effect to the realisation of the National Development Plan and the nine strategic priorities identified in the Budget,” he noted.