1. DEPUTY CEO, BUSINESS UNITY SOUTH AFRICA
SUBMISSION TO THE PARLIAMENTARY STANDING AND SELECT COMMITTEES ON FINANCE ON THE 2011 MEDIUM TERM BUDGET POLICY STATEMENT (MTBPS)
RAYMOND PARSONS
DEPUTY CEO, BUSINESS UNITY SOUTH AFRICA
Tuesday, 1 November

2. INTRODUCTION - 1 BUSINESS REACTION TO 2011 MTPBS
REALISTIC ANALYSIS UNDER DIFFICULT CONDITIONS
REALITY OF GLOBAL UNCERTAINTY
TRADE-OFFS IN POLICY
ADAPTABILITY AND FLEXIBILITY IN CHANGED ECONOMIC CIRCUMSTANCES
MINI-BUDGET STRATEGY POSITIVE FOR BUSINESS CONFIDENCE

3. MTBPS HAS STRUCK GOOD BALANCE BETWEEN –
INTRODUCTION - 2
MTBPS HAS STRUCK GOOD BALANCE BETWEEN –
EXTERNAL AND INTERNAL ECONOMIC FACTORS
PRESENT AND FUTURE
THREATS AND OPPORTUNITIES
COUNTERCYCLICAL AND STRUCTURAL FACTORS IN DEFINING SA’S FISCAL RESPONSE
DISTINGUISH BETWEEN THE FACTORS SA CAN CONTROL AS OPPOSED TO THOSE IT CANNOT INFLUENCE – ‘THINK GLOBAL, ACT LOCAL.’
RECOGNISING THE ROLE OF THE PRIVATE SECTOR IN THE PROMOTION OF GROWTH AND EMPLOYMENT AND THE NEED TO CREATE A FACILITATING ENVIRONMENT

4. GDP GROWTH GOVERNMENT FORECASTS
INTRODUCTION - 3
ECONOMIC FORECASTS
DOWNWARD REVISIONS IN GROWTH FORECASTS FOR THE SA ECONOMY BY MTBPS ARE CORRECT. ECONOMY HAS SLOWED IN 2011
CURRENT FORECASTS BY BUSA
GDP GROWTH GOVERNMENT FORECASTS
3.1% %
3.5% %
% %
% %
THESE CONVERGING FORECASTS ARE OBVIOUSLY BASED ON CERTAIN ASSESSMENTS ABOUT THE BALANCE OF RISKS IN THE OUTLOOK.

5. DYNAMICS OF ECONOMIC ANALYSIS INFLUENCED BY-
INTRODUCTION - 4
DYNAMICS OF ECONOMIC ANALYSIS INFLUENCED BY-
INCREASED RISK THAT THE BEST FORECASTS BY BOTH PUBLIC AND PRIVATE SECTORS COULD TURN OUT TO BE WRONG
FISCAL OPTIONS FOR SA WILL CONTRACT OR EXPAND DEPENDING ON GROWTH PERFORMANCE
THE MARGIN FOR ERROR IN ECONOMIC FORECASTING HAS INCREASED
THE MARGIN FOR ERROR IN POLICY HAS NARROWED
ASSESSMENT OF THE BALANCE OF RISKS IN FISCAL POLICY
UNWISE TO RAISE TAXES AT THIS STAGE IN THE BUSINESS CYCLE

6. FISCAL FRAMEWORK
COUNTERCYCLICAL POLICY OF EARLIER YEARS HAS PROVED ADVANTAGEOUS
STABILISATION OF NET DEBT TO GDP BY 2014/15 NECESSARY IN VIEW OF SLOW ECONOMIC RECOVERY
NEED TO CONTROL STATE’S WAGE BILL
NEED FOR BETTER BALANCE BETWEEN CONSUMPTION AND INVESTMENT BY STATE TO SUPPORT GROWTH AND EMPLOYMENT

7. SUPPORT FOR JOB CREATION, LONG TERM DEVELOPMENT AND ECONOMIC GROWTH – 1
PROMOTING JOB CREATION AND JOB CREATION INCLUDES -
NEW GROWTH PATH PROCESS (NGP)
NEDLAC DISCUSSIONS ON RURAL DEVELOPMENT REFORMS
LOCAL PROCUREMENT – DESIGNATION OF LOCALLY MANUFACTURED PRODUCTS – SUPPORT FOR ‘PROUDLY SA’
JOBS FUND
ROLE OF YOUTH WAGE SUBSIDY

8. SUPPORT FOR JOB CREATION, LONG TERM DEVELOPMENT AND ECONOMIC GROWTH – 2
COMPETITIVENESS SUPPORT FUND
APTLY-NAMED CSF
IMPORTANT FOCUS ON ASSISTING SECTORS TO BE COMPETITIVE AND INCREASE EMPLOYMENT POTENTIAL
ENTERPRISE DEVELOPMENT, ESPECIALLY FOR SMALL AND EMERGING BUSINESS, NEEDS TO BE AT THE HEART OF POLICY
JOINT EFFORT WITH PRIVATE SECTOR

9. SUPPORT FOR JOB CREATION, LONG TERM DEVELOPMENT AND ECONOMIC GROWTH – 3
EXPANSION OF INFRASTRURAL INVESTMENT
INCREASE IN INFRASTRUCTURAL INVESTMENT NEEDED TO IMPROVE PRODUCTIVE CAPACITY OF ECONOMY AND TO CREATE JOBS
INFRASTRUCTURE SPENDING NEEDS TO BE EXPEDITED, AS IT IS LAGGING BEHIND BUDGET ALLOCATIONS
IMPORTANT ROLE FOR PRESIDENTIAL INFRASTRUCTURE COORDINATING COMMISSION (PERHAPS ASK FOR A PRESENTATION?)
NEGATIVE IMPACT OF RAPIDLY ESCALATING ADMINISTERED PRICES ON COSTS OF DOING BUSINESS IN SA

10. SUPPORT FOR JOB CREATION, LONG TERM DEVELOPMENT AND ECONOMIC GROWTH – 4
PUBLIC PRIVATE SECTOR PARTNERSHIPS (PPPs)
PPPs ARE MARGINAL IN EXPEDITING INFRASTRUCTURAL DEVELOPMENT
PPPs ONLY ABOUT 3% OF TOTAL INFRASTRUCTURE INVESTMENT IN SA
NEED TO USE ALL AVAILABLE MECHANISMS TO EXPEDITE INFRASTRUCTURE SPEND, ESPECIALLY AT LOCAL LEVEL
MOBILISE PRIVATE SECTOR TO GET ENHANCED DELIVERY AND OUTCOMES
SA IS WELL BELOW COMPARABLE COUNTRIES IN UTILISING PPPs AS A TOOL FOR DEVELOPMENT AND JOB CREATION AS JUST TWO SELECTED GRAPHS SHOW

11. PPP spend as percentage of GDP between 1990 and 2010
Source: WB PPI database (2011) and IMF (2011)
The graph shows that:
South Africa spent on average 0.6% of annual GDP on PPPs between 1994 and 2010, while India spent on average 1.1%, Brazil 0.8%, India 1.1% and Thailand 1.1% of GDP over the period 1990 to 2010.

12. Total PPP spend between 1990 and 2010 as a percentage of 2010 GDP
Source: WB PPI database (2011) and IMF (2011)
The graph shows that:
South Africa lags all the other countries in terms of spend in both narrow and broad categories from 1990 to 2010 as a percentage of 2010 GDP for the selected countries

13. SUPPORT FOR JOB CREATION, LONG TERM DEVELOPMENT AND ECONOMIC GROWTH – 5
GREEN ECONOMY
TANGIBLE RECOGNITION OF MOVING TOWARDS A MORE ENVIRONMENTALLY-FRIENDLY ECONOMY REQUIRES GOVERNMENT SUPPORT
NEED FOR BALANCED APPROACH TO DECISIONS ON CLIMATE CHANGE IN SA
EMPHASIS ON GLOBAL COOPERATION
NEED TO MAKE A SUCCESS OF COP 17 – SA’S LEADERSHIP
‘GREEN ECONOMY ACCORD’ MAY EMERGE FROM NGP PROCESS SOON

14. 3. SUMMARY AND CONCLUSIONS
AS WE SEEK MAKE THE SA ECONOMY BIGGER, STRONGER AND BETTER IN THE YEARS AHEAD, WE NEED TO –
SUSTAIN THE PRESENT ECONOMIC RECOVERY
INCREASE THE ACTUAL AND POTENTIAL REAL ECONOMIC GROWTH RATE
MAXIMISE THE NUMBER OF JOBS CREATED AT ANY GIVEN GROWTH RATE, ESPECIALLY AMONG THE YOUTH
IMPLEMENT AND DELIVER ON AGREED DECISIONS FOR WHICH FUNDS HAVE BEEN ALLOCATED – ‘WALK THE TALK’ – AND GET OUTCOMES
COLLABORATE WITH KEY STAKEHOLDERS, INCLUDING BUSINESS

15. THANK YOU