Categories Business Tech World Will Godongwane’s budget demonstrate commitment to Ramaphosa’s priorities? Post author By vanirexodus Post date February 23, 2022 No Comments on Will Godongwane’s budget demonstrate commitment to Ramaphosa’s priorities? Finance Minister Enoch Godongwana should use the priorities of the State of the Nation speech and focus Wednesday’s budget on what will grow the economy and create jobs in real terms. He was able to achieve this by allocating more resources to manufacturing and manufacturing, including multiple industries as diverse as automotive, chemicals, electronics, healthcare and textiles. Godongwana must commit to President Cyril Ramaphosa’s priorities to achieve miraculous growth. The main cause of South Africa’s deteriorating public finances is a lack of growth in the economy and recently the pandemic has wiped out companies that… Finance Minister Enoch Godongwana should use the priorities of the State of the Nation speech and focus Wednesday’s budget on what will grow the economy and create jobs in real terms. He was able to achieve this by allocating more resources to manufacturing and manufacturing, including multiple industries as diverse as automotive, chemicals, electronics, healthcare and textiles. Godongwana must commit to President Cyril Ramaphosa’s priorities to achieve miraculous growth. The main cause of South Africa’s deteriorating public finances is a lack of economic growth and recently the pandemic has wiped out companies that were expected to contribute through corporate taxation and sustainable job creation. Strengthening the macroeconomic framework to ensure certainty and accountability – and controlling public debt-to-GDP at a reasonable level – is essential for economic development and recovery. South Africa’s macroeconomic fundamentals have weakened and vulnerabilities have increased. Covid has further deteriorated the fiscal position in 2020 and last year. The operational and financial performance of state-owned enterprises (SOEs) has deteriorated and government debt-to-GDP is estimated to have reached nearly 94 to 100% of GDP this year. Private investment could gradually pick up as the Covid-related uncertainty eventually eases. ALSO READ: Business ‘cautiously optimistic’ ahead of budget speech In the medium term, growth is expected to weaken to 2.4% this year, capped by structural investment constraints, prevailing policy uncertainty, the elective conference and high government debt, which will hamper job creation. Godongwana is expected to devote a higher percentage of its budget to economic development, covering: special economic zones (SEZs) for agriculture and agro-processing, light and heavy manufacturing, technological progress and infrastructure development projects that can stimulate economic growth, economic development and job creation. The second highest percentage should be allocated to the repayment of government debt to GDP, which ranks higher on the budget allocation for 2020 and 2021. The finance minister is not expected to increase corporate and personal income taxes in 2022. The SEZ program aims to attract foreign direct investment (FDI) firm-level investment and improvement of firm-level productivity by improving firm-level coordination, networking and innovation. The effectiveness of tax incentives for both foreign and domestic investment deserves special attention. The estimates indicate that export-oriented investment (by multinational companies) is particularly sensitive to host country taxation, that this sensitivity appears to be greater in developing countries than in developed countries – and that this sensitivity becomes even greater over time. . The aim of the SEZ policy is to attract foreign direct investment to stimulate growth. Therefore, the Minister is expected to review and align tax incentives with investor interests, as the main purpose of SEZ is to attract foreign direct investment through lower tax incentives and other infrastructure benefits for investors, and that will enable job creation. READ NOW: South Africans don’t care about budget speech Trends in FDI flows usually reflect investor confidence in South Africa’s political and economic conditions. Thus, within certain limits, it can serve as a barometer of perceived stability in South Africa, politically, economically and socially, and the perceived capacity of governments and investors to manage potential risks. Godongwana must provide assurances to the nation on South African debt restructuring mechanisms and agreed revised repayment terms, as the International Monetary Fund has expressed concern that the outlook for South Africa remains precarious. Godongwana is expected to allocate to a balanced energy mix and state-owned enterprises. It would also be stunning to hear the post-pandemic economic strategy for a state bank and sovereign wealth fund. Mkhabela is chief executive and chief economist at Antswisa Transaction Advisory. ← Budget speech: will the government use windfall gains to boost SA or repay loans? → Aiden Markram in the spotlight for second Proteas-NZ Test Leave a Reply Cancel replyYour email address will not be published. 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