feature / economic year in review Claire Bisseker bissekerc@fm.co.za
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So it was a big surprise when, at the end of June, President Cyril Ramaphosa kicked things up a gear by lifting the cap on energy self-generation from 10MW to 100MW, unleashing the prospect of billions of rands in green energy investment. This, coupled with the robust firsthalf recovery driven by the commodity boom, transformed SA’s immediate fiscal and growth picture. Suddenly it was possible to imagine a future without load-shedding, where the debt ratio and SA’s credit risk were falling in tandem, and positive per capita growth was restored after years of steady decline.
he year 2021 started with SA in the throes of the second wave of the pandemic, which scuppered the summer tourism season and kneecapped large parts of the hospitality sector. So the mood was understandably grim when finance minister Tito Mboweni stood up in February to release what turned out to be his final national budget. It was remarkable for the strong resolve the National Treasury showed in sticking to its fiscal consolidation plan. The only problem was that it relied on a three-year wage freeze to achieve most of the envisaged spending cuts. Nobody was surprised when the unions dug in their heels and the government ultimately wilted, granting workers an average increase of 6% for 2021/2022. The upshot was a R20.5bn overrun on the wage bill. But, thanks to an unexpectedly large R120bn revenue windfall, courtesy of the commodity boom, the extra amount could be absorbed — and the fiscus still looked better by the end of the year than expected. Previously, the Treasury was expecting the debt ratio to hit 81.9% of GDP this fiscal year and to stabilise at about 89% by 2025/2026. Now it is set to come in at just under 70% this year and stabilise at about 78% in five years. So debt is going to keep rising, but it’s still a substantial improvement. In short, the cyclical uplift to SA’s revenue and growth prospects in 2021 provided by the commodity boom made both the fiscus and the economy appear much healthier on the surface. This allowed SA to sail through the May and November ratings agency What it means: reviews unscathed. The commodity boom However, neither has made the economy Moody’s nor Fitch appear much healthier, have removed their but SA’s inability to negative outlooks on reform jeopardises its the country. long-term sustainability Indeed, there were strong warnings, both from the ratings agencies and business in the first half of the year, that the pace of structural reform was still too slow and the cost of borrowing too high for debt stability to be achieved over a five-year horizon, as the government has promised. Business has become increasingly frustrated at the government’s failure to ease the cost of doing business. Its concerns were heightened when the country entered a severe third wave of the pandemic as winter set in and lockdown restrictions were ratcheted up to level 4.
Taken together with the announcement that the private sector had been granted a majority stake in SAA, and that the Transnet National Ports Authority would be corporatised, it even suggested the government was warming to the desirability of allowing greater private sector participation in SA’s key network sectors. This is of crucial importance to the country’s longer-term sustainability, as SA’s costly, inefficient logistics system is one of the key impediments to growth. At the time, Bureau for Economic Research chief economist Hugo Pienaar described the move on self-generation as “a much-needed game-changer”. The hope was that if it got the ball rolling on other stalled reforms and spurred
ROLLERCOASTER YEAR
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financialmail.co.za
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December 16 - December 22, 2021
If SA thought 2021 would be the year harsh lockdowns would end, it was sorely mistaken. The country’s economy and psyche have been dragged from euphoria to despair by the events of the past 12 months
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