GDP bounces back to pre-pandemic levels as Godongwana delivers budget

By Treasury’s measures, this outlook partly reflects a slowing economic recovery with the economy expected to return to pre‐pandemic production levels. 

GDP growth is expected to average 1.8 per cent over the next three years. 

It’s understood the 2022 Budget Review will support the implementation of a wide range of reforms to bolster economic growth and employment over the medium and long term. 

“More rapid implementation of these reforms, complemented by fiscal consolidation to provide a stable foundation for growth, will ease investor concerns about South Africa, and support a faster recovery and higher levels of economic growth over the long term.

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“Reducing regulatory constraints, providing effective services, and coordinating and sequencing economic interventions will bolster public and private investment, which will, in turn, increase resilience and support economic transformation.”

Godongwana made the assertions during his maiden budget statement on Wednesday.

Government is faced with growing pressure to turn the country’s fortunes around following a tough couple of months.

While the odds appear to be in South Africa’s favour, Godongwana warned it wouldn’t be an easy feat.

He told MPs that the largest risk to the recovery in the public finances is a deterioration in in GDP growth. 

“Though the fiscal outlook has improved, it is subject to significant risks. These include slowing global and domestic economic growth, calls for a permanent increase in social protection that exceed available resources, pressures from the public‐service wage bill; and continued requests for financial support from financially distressed state‐owned companies. 

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“We need to stay vigilant and mitigate the risks where possible. In the upcoming period, we will do more work to strengthen fiscal anchors.”

Godongwana warned Treasury would reduce the continual demands on South Africa’s limited public resources from state-owned companies.

“For this reason, SOCs need to develop and implement sustainable turnaround plans. The future of our state-owned companies is under consideration by the Presidential State-Owned Enterprises Council. Their future will be informed by the value they create and whether they can be run as sustainable entities without bailouts from the fiscus.

“Some state-owned companies will be retained, while others will rationalised or consolidated. To reduce their continuing demands on South Africa’s public resources, the National Treasury will outline the criteria for government funding of state‐owned companies, during the upcoming financial year.

“This, Madam Speaker, is what we mean by tough love!”

He vowed to find long lasting solutions for the country’s embattled SOEs.