Busa says finance minister should cut spending and stay away from tax hikes.
Business Unity South Africa has recommended that National Treasury focus on shortening its expenditure bill, resist the urge to implement tax increases, and exercise caution when raising debt ahead of the medium-term budget policy statement on Wednesday.
“South Africa also has a growing tax revenue shortfall, in part because of weak household finances, low business confidence, low investment, lower global commodity prices, and a weak rand,” Busa said, justifying its stance.The group said the minister and his fellow cabinet members need to be on the same page when it comes to reducing the state’s expenditure bill.
With regards to its position on debt, Busa acknowledged that although Godongwana won’t have much choice but to raise debt, increases should be kept to a minimum and should be complemented by critical economic reforms that will encourage greater private sector investment.Austere budgets and politics make for uneasy bedfellows
“With a cost of debt at 11%-13%, the only way to prevent severe fiscal deterioration in the absence of robust economic growth and stabilise our debt is to run a continual primary surplus of 1.5% to 3% GDP. Put simply, to save money to pay down the interest bill with cash each year,” Petousis wrote in an analyst note.
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