BUSINESS UNITY SOUTH AFRICA SUBMISSION ON FINANCE & FISCAL REVENUE PROPOSALS FOR 2012/13 Presented by Prof. Raymond Parsons BUSA Special Policy Advisor 30 October

INTRODUCTION – About BUSA  BUSA comprises business organisations, chambers; industry, professional & corporate associations  We represents SA business, incl. SMMEs, on macro- economic and high level issues nationally and internationally  Our function is to ensure business plays a constructive role in SA’s economic growth, development and transformation  BUSA is Business’ representative at Nedlac 2

3 ECONOMIC OUTLOOK  BUSA shares the realistic assessment of the economic outlook given in the MTBPS in respect of both external and internal factors  Common element in assessing growth prospects is uncertainty  There is close convergence between National Treasury and BUSA’s economic forecasts

GLOBAL OUTLOOK Lower Growth and Higher Risks 4

5 DOMESTIC OUTLOOK Weak Performance

AN OVERALL APPROACH  SA has remained within modest 3%-3.5% growth; not 5%-7% growth of other emerging markets  BUSA believes it necessary to distinguish between :  Factors over which SA has little or no control, e.g. Global economy  Factors over which SA does have control, e.g. Domestic policies  BUSA agrees with the Finance Minister that we need to tackle internal challenges to build a stronger economy  Numerous structural problems are of our own making; Marikana tragedy, industrial unrest have ripple effects on economy  Economic consequences feed into MTBPS outlook: growth, tax revenues, exchange rate, debt ratios and unemployment 6

POSITIVE FEATURES OF THE MTBPS 1.Overall approach is once again a balanced and realistic assessment of challenges face by SA 2.BUSA welcomes extent to which budgetary decisions are increasingly aligned within the framework of the NDP 3.Provides a definitive statement on the limits that SA’s debt to GDP ratio of fiscal deficit should not exceed – essential for investment 4.Emphasis on importance of collaboration among key economic stakeholders is endorsed by BUSA 5.Renewed message of fiscal discipline is endorsed by BUSA 6.National Treasury’s commitment to the appointment of senior procurement staff is welcomed and should be expedited 7

SOME VULNERABILITIES IN THE MTBPS 1.SA’s headline fiscal ratios may appear safe but this can mask vulnerabilities 2.BUSA supports a broadly conservative approach to state spending, but remains concerned by rising public sector wage bill 3.MTBPS indicates taxes may be increased should economy not recover – other forms of revenue may have to be found 4.Implementing infrastructure projects – improving state capacity and mobilising private sector capacity essential 5.Excessive rises in administered prices is having a negative effect – a better planned and coordinate approach is required 6.The 44% drop in FDI flows to SA in the past year is a matter of deep concern to BUSA 8

CONCLUDING COMMENTS 1.If SA can craft and implement the right short and long term measures to address current challenges, it is possible to prove sceptics about SA wrong 2.BUSA believes there is a ‘virtuous circle’ of high growth, democratic governance and social development possible in SA 3.NDP confirms the need for a higher job-rich growth path, a faster pace of development and a society growth wealthier in the broadest sense 9

CONCLUDING COMMENTS  In the words of the NDP: South Africa has the means, the goodwill, the people and the resources to eliminate poverty and reduce inequality. It is within our grasp. But it will not happen unless we write a new story; a story of people, their relationships, their dreams and their hopes for a better tomorrow. We want our children and young people to have better life chances than we have... The capabilities that the country needs to enable citizens to thrive include a capable state, leadership from all sectors of society, a pact for mutual sacrifice and trust.  This is the message BUSA draws from the latest MTBPS. Government must create the conditions and environment for higher levels of investment to create growth 10

THANK YOU 11