Finance Minister Nhlanhla Nene highlights challenges facing South Africa

Posted On Friday, 14 November 2014 08:06 Published by
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Finance Minister Nene highlights challenges facing SA

Nhlanhla Nene

The need to encourage greater private sector investment and the need to improve the state's capacity to monitor, implement and manage projects are the two major challenges facing the economy, says Finance Minister Nhlanhla Nene.

Addressing the American Chamber of Commerce business breakfast, Minister Nene said government is working to address these challenges. "First and foremost, we have to put public finances on a sustainable footing. The 2014 Medium Term Budget Policy Statement outlined a package of measures. First, we have to slow down the growth of government debt," said the Minister.

He said that fiscal consolidation can no longer be postponed. "Second, we have to improve the quality of government services. Despite the huge increase in government spending over the last ten years, the quality of government services have remained a challenge.

"Thanks to a freeze in non-essential services and wage moderation, combined with tax measures to increase revenue, we will improve the fiscal position by over R50 billion over the next two years, whilst maintaining a focus on investment spending," he explained.

Additionally, any potential support given to State Owned Enterprises (SOEs) will be "budget neutral".
"If required, balance sheet support will come from disposal of non-strategic assets. We will not borrow to bail out SOEs.

"Our second main thrust is to crowd in private investment. The past five years have seen investment rise to nearly 20 percent of GDP, buoyed by a doubling of public sector spending on infrastructure.
"While public investment has been resilient, private investment has remained subdued since the onset of the global financial crisis beginning 2008," said the Minister.

Government is also taking steps to improve labour relations. Every business requires good relations between employers and employees. "In line with improving domestic labour relations, dispute resolution mechanisms have been galvanised via recent amendments to the Labour Relations Act. Additionally, the recent Indaba on labour relations has begun the work of identifying areas where solutions to long standing problems can be addressed."

South Africa's economic performance has weakened since the start of the year with growth bring revised downwards to 1.4% down from 3.6% in 2011.

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