Minister of Finance, Nhlanhla Nene, recently tabled the Mini-budget 2014 speech in parliament. This outlined major challenges that South Africa faces at a macro level which are affecting economic growth.
The essence of the speech was encapsulated by the following words by the Minister: “In many countries growth has slowed and the economic outlook is uncertain. Across the world, tough questions are being asked about how to generate growth, and how to reduce inequality. Governments everywhere face difficult choices because the gap between what is required and what can be afforded is very wide. And so we have to be steadfast in our resolve to do more, together, with less.”
Highlights from the speech include:
· Economic growth is expected to be 1.4 % this year and it is projected that the growth will reach 3% in 2017. The downward revision is also partly due to a weak global environment and obstacles such as energy constraints, labour market disruptions, skills shortages and difficulties in industrial transformation.
· We import considerably more than we export, tax revenue is below budget projection and Government debt continues to rise as a percentage of GDP.
· The main challenge is restoring balance in the nation’s finances, bolstering investment, and achieving better value for money in public expenditure. Government wants to improve export performance and shift away from consumption led, debt-reliant expansion.
· Government needs to reduce spending and enhance revenue collection to reduce the deficit.
· There will be a focus on small business development and on growing this sector
· There was concerted effort to incorporate NDP into the mini budget and all government departments have aligned their budgets to the plan and they will be measured accordingly.
Questions and relevance to risk managers
· Did the mini budget give you confidence the future outlook of the country and your business?
· Did the budget present new risks from a business/organisational perspective?
· Are labour disruptions and energy supply major concerns on at your operational/strategic risk registers?
· Are there any interventions beyond ‘normal business’ that your organisation should be considering in supporting the NDP or addressing some of the country challenges such as unemployment and inequality?
Share your thoughts in the comments section below