FINANCE Minister Pravin Gordhan’s 2016-17 budget should focus on fostering economic growth rather than simply on fiscal consolidation, though this is also necessary, says economist and Pan-African Capital Holdings CE Iraj Abedian.
Mr Gordhan should on Wednesday deliver a credible economic growth strategy for the next three to five years that has strong political backing by the Cabinet, Mr Abedian said in an address to the Cape Town Club on Tuesday.
The strategy, based firmly on the private sector, has to emphasise its dominance in the economy. Mr Gordhan’s budget should highlight the importance of high value added, high-wage manufacturing sectors, and stress government’s commitment to create a business friendly regulatory environment, Mr Abedian said.
Privatisation was a dead issue as there was nothing worth buying in the public sector, he said.
Fiscal consolidation including a real decrease in government spending would not be sufficient to ward off a credit ratings downgrade, he said.
"It is a wrong approach to push for cut, cut, cut. We have to go for the package … 80% growth and 20% fiscal consolidation," said Mr Abedian.
While emphasising the importance of an economic growth strategy as an essential part of the total budget package, he warned that Mr Gordhan did not have control over economic policy.
The current Cabinet, he believed, was highly unlikely to accept the reconfiguration needed to avoid both a contractionary fiscal and monetary policy.
He also believed it was impossible that the ratio of debt to gross domestic product could be kept below the sacrosanct 50%. In any case, this should not be the major indicator. More important were the drivers of future revenue growth, which are ultimately economic growth.
Mr Abedian dismissed economic growth projections of the World Bank, International Monetary Fund, the Reserve Bank and Treasury which as "mere dreams".
"If we make 0.5% we will be lucky," he said.
Pravin Gordhan. Picture: BLOOMBERG/JASON ALDEN
FINANCE Minister Pravin Gordhan’s 2016-17 budget should focus on fostering economic growth rather than simply on fiscal consolidation, though this is also necessary, says economist and Pan-African Capital Holdings CE Iraj Abedian.
Mr Gordhan should on Wednesday deliver a credible economic growth strategy for the next three to five years that has strong political backing by the Cabinet, Mr Abedian said in an address to the Cape Town Club on Tuesday.
The strategy, based firmly on the private sector, has to emphasise its dominance in the economy. Mr Gordhan’s budget should highlight the importance of high value added, high-wage manufacturing sectors, and stress government’s commitment to create a business friendly regulatory environment, Mr Abedian said.
Privatisation was a dead issue as there was nothing worth buying in the public sector, he said.
Fiscal consolidation including a real decrease in government spending would not be sufficient to ward off a credit ratings downgrade, he said.
"It is a wrong approach to push for cut, cut, cut. We have to go for the package … 80% growth and 20% fiscal consolidation," said Mr Abedian.
While emphasising the importance of an economic growth strategy as an essential part of the total budget package, he warned that Mr Gordhan did not have control over economic policy.
The current Cabinet, he believed, was highly unlikely to accept the reconfiguration needed to avoid both a contractionary fiscal and monetary policy.
He also believed it was impossible that the ratio of debt to gross domestic product could be kept below the sacrosanct 50%. In any case, this should not be the major indicator. More important were the drivers of future revenue growth, which are ultimately economic growth.
Mr Abedian dismissed economic growth projections of the World Bank, International Monetary Fund, the Reserve Bank and Treasury which as "mere dreams".
"If we make 0.5% we will be lucky," he said.
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