South Africa’s economy is facing significant challenges that are hindering its medium-term growth prospects, according to Finance Minister Enoch Godongwana.
Godongwana said challenges include power cuts, a struggling logistics sector, high inflation, rising borrowing costs, and a weaker global environment.
These factors have contributed to a weak economic growth forecast of 0.8% in 2023 and 1.4% between 2024 and 2026. These growth rates are insufficient to achieve the desired levels of development for the country.
The global economic environment is also less supportive of South Africa’s growth prospects.
Factors such as weaker growth in China, South Africa’s largest trading partner, lower commodity prices, and the potential for higher US interest rates have further dampened the outlook.
These external factors, combined with the internal challenges, have resulted in a substantial worsening of the main budget deficit.
The deficit is now projected to be 4.9% of GDP, higher than the previous estimate of 4.0%.
Given the current circumstances, Godongwana said it is crucial for measures to be taken to stabilize public finances and reform the economy to generate higher growth.
He said the decline in commodity prices, increased inflation, and a weaker Rand have already had a significant impact on public finances, leading to a sharp increase in the main budget deficit.
To address these challenges and improve the economic outlook, South Africa needs to focus on implementing reforms that will attract investment, boost productivity, and create a more favorable business environment.
Only through these efforts can the country overcome its current economic weaknesses and achieve sustainable and inclusive growth.
The South African Revenue Service (SARS) will be focusing on enforcing compliance in various areas such as debt collection, fraud prevention, curbing illicit trade, voluntary disclosures, and encouraging honest taxpayers to comply voluntarily.
The Minister emphasized that an efficient tax administration and broadening the tax base is the most effective way of funding the government. He also highlighted the importance of collecting every additional Rand of revenue to reduce the need for borrowing.
Despite the challenges faced, the South African economy has shown signs of resilience with real GDP exceeding pre-COVID-19 pandemic levels.
The first half of the year saw a growth of 0.9 percent in the economy, with the tourism sector growing more than 70 percent, and agriculture expanding by 7.8 percent.
The construction, transport, and communications sectors also achieved strong growth, giving hope for the future