In an open letter from Business Leadership South Africa (BLSA) addressed to Finance Minister Tito Mboweni, the organisation asks that the Medium Term Budget Policy Statement (MTBPS) "aggressively trim remaining fat" towards efficient revenue collection in the country.

On behalf of business, BLSA calls for meaningful restraint on the public sector wage bill and that priority be given to necessary social and recovery spending.

Mboweni is due to deliver the MTBPS on October 28.

BLSA adds that while the desire to see a “primary balance” by 2023/24 sounds rather dry, business understands it is important as a step towards balancing the books and stabilising debt levels as a share of gross domestic product (GDP).

Equally, it says, expenditure on the compensation budget must fall toward 10.5% of GDP from 14.2% this fiscal year.

BLSA recommends that healthcare, education and the National Prosecuting Authority be prioritised in the budget, while poor past decisions mean substantial commitments to State-owned entities (SOEs) also have to be met, particularly Eskom.

“Pain has to be taken on budget lines where the growth impact will be smallest. It is important, too, to set out a roadmap toward the elimination of SOE subsidies and bailouts that is more credible than past promises.

“Many issues that were clear in the emergency budget at the end of June were thrown forward, some to the Budget in February 2021. Business wants to hear some detail at the MTBPS to reduce doubt and aid planning for the year ahead in such uncertain times,” BLSA states.

It adds that an MTBPS that can establish credibility and a path out of this crisis will boost confidence and "tilt the dial" on investment and hiring decisions that are uncertain at present.

“Decisions are always made in business at the margin and [the National] Treasury should affect trust and faith at the margin to make a real difference.”

PRIVATE SECTOR LEADERSHIP

The organisation states that business has, through BLSA, Business for South Africa and other forums, provided technical support, personnel and expertise into government over the past two-and-a-half years in response to the President’s thuma mina call.

"Yet, a recovery from a crisis of this depth cannot be micromanaged and must be unleashed with the State assembling the right foundations," it asserts.

BLSA believes government needs to understand where it does not have the capacity - let alone the funds – to drive elements of the recovery and enable business to do so, where applicable.  

There are three key areas in this regard which are interlinked, BLSA explains.

First, the government’s infrastructure push is welcome but cannot be fully centrally directed at every stage and must see a greater degree of private-led provisioning and financing of bankable projects.

“Our member firms, including banks and asset managers – stand ready to fund bankable and economically positive infrastructure in significant size in the coming years. Yet uneconomical and pet projects distract,” BLSA points out.

The second issue is that the private sector has the capacity to rapidly solve the current and growing future energy crisis. The private sector can finance and deliver the projects rapidly and on budget for their own use embedded in their operations, or into a smart future-facing grid managed by an Independent Transmission System Market Operator either to be bought by specific buyers or for general use.

BLSA notes that government simply needs to stand out of the way, change its mindset and make some small amendments to regulations allowing others to solve the problem.

Government can then be free to direct a pro-jobs and pro-local-content industrialisation that helps effectively manage a just energy transition.

BLSA continues that the third area is the need for business to have the freedom to find the right technical mix of skills in their businesses to make the maximum impact that will allow us to hire the largest number of South Africans. This means a liberalisation of the key skills visa list and far more efficient administration of it.

The partnership of business and State should be very simple – we want to grow as fast as possible, which allows us to hire the most people possible, BLSA affirms.

ILLICIT ECONOMY

With growth comes increased tax revenue, but tax can also stimulate or restrain growth. Increased tax rates divert money from investment, which slows the recovery.

Tax collection can be improved by clamping down on the illicit economy and continuing to invest in improved collection capacity at the South African Revenue Service.

Simultaneously, BLSA says "we must ensure that State expenditure is free of vested interests, and as efficient as possible, particularly in spending on education, skills and healthcare for all".

“Our interests are aligned. We are interested in a conducive environment that is eliminating poverty and reducing inequality for our member firms to flourish in. Cutting expenditure can only get one so far if there is no growth.

“The same growth that will help Treasury with revenues, and shareholders and employees with income, is the growth that will lead us away from the fiscal cliff edge and the path to an International Monetary Fund (IMF) programme,” BLSA puts forward.

The credibility of government’s reform and recovery plan will combine with the fiscal credibility set out in the MTBPS "to lay out the train tracks from here".

BLSA says it certainly does not want a path that leads to an IMF programme, given that it can be avoided by the right choices being made with strong leadership that sweeps away vested interests and stale thinking.

“The choices outlined in the coming week will dictate if we are on that path and those steps are being taken,” the organisation notes.