The forthcoming Budget Speech, on February 19, will be a test of the Government of National Unity’s ability to set coherent spending priorities that put the country ahead of party politics, says Business Leadership South Africa CEO Busi Mavuso in her latest newsletter.

With National Treasury having recently issued new regulations governing public-private partnerships (PPPs) that allow government to partner with private investors to fund, build, operate and maintain public infrastructure, it has already set a positive direction for the Budget.

If South Africa is to achieve 3% GDP growth by the end of this year, government must ensure it lives within its means and focus spending on growth-enhancing activities, Mavuso states.

She hopes the Budget will prioritise investment towards the creation of sustainable jobs and towards driving public sector investment.

“As we have learnt to our cost, if investors are worried about government’s ability to meet its financial obligations over the long term, they do not put their own money at risk.

“Finance Minister Enoch Godongwana will, therefore, have to demonstrate that government can fund its spending plans without dragging down the economy through tax increases.”

Commenting further on the new regulations issued by Treasury last week, Mavuso commends the entity for having set in place rules to make it easier for the private sector to take initiative on new PPPs and smooth the regulatory path for smaller PPPs.

“The new regulations set down a mechanism for unsolicited PPPs, which enables the private sector to innovate and develop new concepts to help the public sector achieve its objectives,” she explains.

The national Budget has the potential to further this theme with more detail on infrastructure plans, particularly through State-owned enterprises where the private sector can also partner to improve delivery.

Mavuso also hopes the Budget will set a clear path for debt levels, credibly showing how they can be reduced and improve the confidence of ratings agencies.

She highlights that Treasury will need to set out how it plans to deal with the financial challenges facing Transnet and Eskom, since both of these still need to fix their balance sheets and invest more in infrastructure.

FOREIGN POLICY

Mavuso says the Budget comes at a time when foreign policy has become critical to the outlook for South Africa’s economy and jobs.

She explains the world is coming to terms with US President Donald Trump’s re-election and his administration’s wide-ranging changes to how America engages with the world.

South Africa has already been singled out by the administration and Mavuso says the country must respond with cool heads and proactively try to manage its relationship with the US.

The US is an important trading partner for South Africa, particularly since it imports platinum and other minerals, as well as manufactured goods such as vehicles and machinery.

“The trade balance favours South Africa and supports many jobs especially through high-value-added manufactured goods.

“Our respective private sectors have close relationships with more than 600 American companies active here. Our businesses work under the rule of law within constitutional democracies, and there is much we can achieve by working together, which is why trade flows have been on an upward trend for several years,” Mavuso states.

It helps that South Africa is chairing the Group of Twenty countries this year, which gives the country a chance to build relations with international counterparts and have global leaders visit local shores.

“We have ample opportunity to demonstrate how we are open to business in which the rule of law is completely reliable,” she emphasises.

Possible incoming tariffs by the US will, however, put some of those relationships under strain, particularly in terms of the steel and aluminium tariffs that have already been imposed.

Mavuso explains that steel and aluminium account for about 8.5% of what South Africa exports to the US; therefore the 25% tariff will put pressure on those volumes.

As organised business, the relationship with the US remains top of mind, with jobs and the economy at the centre of our concerns, Mavuso says, adding that South Africa must also keep its wider international relations in perspective, including fast-growing markets that provide opportunities for businesses.