This week, all eyes will be focused on Finance Minister Enoch Godongwana who on 30 October, will be delivering his Medium-Term Budget Policy Statement (MTBPS).
Financial services leaders and experts have outlined their optimism this year, recognising that there are clear opportunities to accelerate South Africa’s economy. However, they also caution that there are various challenges that need to be dealt with in order to fully realise an economic turnaround.
Tax-payers to get some relief
According to Harry Scherzer, Actuary and CEO of Future Forex, in a year marked by uncertainty around weak economic performance and the outcome of a pivotal election, South Africa enters the final quarter of 2024 on a stronger foot than it did at the year’s outset. With interest rates sitting at 14-year highs in Q1, September’s rate cut, along with further expected easing in November, should bring welcomed tax-payer relief.
With over 200 days without power cuts, inflation steadying to March 2021 levels and a positive outlook on the Government of National Unity’s policies (GNU), Finance Minister Enoch Godongwana is tasked with delivering a medium-term statement that outlines how the country will capitalise on the renewed optimism surrounding its economy, while stabilising budget deficits.
Valuation gains from the Gold and Foreign Exchange Contingency Reserve Account will give Treasury additional resources to settle debt-service costs in the medium term. However, with gross loan debt forecast to increase and infrastructure challenges including sub-par ports and rail networks continuing, considerable work remains. This includes building investor confidence, anchoring debt levels and improving state efficiency. Should such changes meet policies that incentivise private-sector-led growth activities in this statement, an improved growth forecast could turn from a pipe dream to reality over the next fiscal period.
Policy reform on the cards
The 2024 Medium-Term Budget Policy Speech will forecast the Government's fiscal framework over the next three years, South Africa’s macroeconomic performance over that period, and highlight Government’s priorities. The Minister of Finance is likely to forecast higher economic growth based on pro-growth policy reforms, greater investor confidence, and investment
Government is also likely to continue with policy reforms to entice greater investment into network industries (logistics, power, and water) and stimulate increased infrastructure spending.
“For an economic turnaround, particularly in sectors like renewable energy, logistics and infrastructure, there should be a continued focus on regulatory reforms and opening critical sectors of the economy to greater private participation and investment. By leveraging these reforms, businesses can align themselves with government priorities and contribute to the achievement of sustainable economic growth and development,” says Shaheed Patel, Tax Consultant at CMS South Africa.
From a tax perspective, as SARS intensifies its compliance efforts, ensuring full tax compliance is crucial for both the public purse and businesses. Professional advice will be key to navigating the evolving tax landscape. "If we address energy and infrastructure challenges, South Africa's strong financial institutions and strategic location as a trade hub in Africa present additional opportunities for recovery," says Patel.
Business will need to remain focused on cost management and strategic tax planning to remain competitive in a challenging environment.
Support for a growing tourism industry
“2024 brings with it a palpable sense of optimism in South Africa's tourism and hospitality industry. Building on the momentum gained in 2023, the sector is set to experience a transformative year. Radisson Blu Hotel Waterfront, a notable example, has witnessed a significant increase in reservations from the UK and USA, largely attributed to the new direct flight routes from Cape Town to the USA,” comments Clinton Thom, General Manager at Radisson Blu Hotel Waterfront.
At the time of the announcement, James Vos, the Mayoral Member for Economic Growth and Tourism at the City of Cape Town described this development as a “big boost” for the tourism and hospitality industry in the city.
The tourism sector will be looking to the speech to bring about positive impacts on the already growing travel numbers in South Africa.
Digitalisation of public services to improve citizen engagement
Elevating citizen experience is an important step for the progress of any society. With the digital age taking over and the private sector consistently driving excellent customer experience, it's worth bearing in mind that digital enablement can streamline public service delivery and deliver citizen delight.
According to Andrew Bourne, Regional Manager, Africa at Zoho, “the operational efficiencies created by a digital government could mean reduced human errors. Additionally, a fully digital government workforce can help improve transparency and accountability. It can help senior government officials gain a complete overview of the services offered, identify bottlenecks, and improve processes.”
He further comments that “for governments that have embraced digitisation and digital transformation, the results have been positive. Digitisation of government services will not just help citizens avail government services from the comfort of their homes, but also help government officials do their work more quickly and with greater ease, making them more productive and efficient.”
A United Nations study found that digitalisation can reduce corruption by up to 30%. Governments can use technology to actively make a positive difference in citizens’ lives, too.