SA’s growth trajectory needs urgent intervention, says Deloitte Africa CEO-elect

SA is exhibiting signs of a failed state. It’s poor economic growth outlook should keep business executives and government leaders awake at night, and drive them to take urgent action to improve the country’s growth trajectory. 

This was the sentiment of business executives who attended and spoke at Deloitte Africa’s recent post-budget virtual dialogue, after finance minister Enoch Godongwana delivered the budget speech in parliament last month. 

Deloitte Africa’s CEO-elect Ruwayda Redfearn, who takes up her position on June 1, was frank. 

“The one aspect of the budget that should have us worried, one that should give all of us as business and political leaders sleepless nights, is the minister’s assertion that over the next three years, SA’s economic growth will average 1.8%, she said. 

Redfearn said the growth rate was inadequate to address the country’s challenges or to meet all of the population’s needs.

“All of us as social partners — business, government, labour and communities — should be seized with finding ways of changing this trajectory and improving our economic growth path,” she said. 

The event was also addressed by the National Treasury director-general Dondo Mogajane and SA Revenue Service (Sars) commissioner Edward Kieswetter. Mogajane warned that SA “is showing signs of becoming a failed state”.

He cited a range of factors including load-shedding, crime levels, and general lack of functionality of many government services that were contributing to the downfall of the country. He urged civil servants to remind themselves of their civil service ethos. 

Mogajane told dialogue participants the government had used the room provided by tax revenue windfall of R182bn to balance a number of competing needs, including investing in infrastructure, maintaining social assistance, and paying off the country’s debt.

“The budget puts 59% of spending into the social wage. At the time of the medium-term budget policy statement in November last year, the increase in the social relief of distress grant of R44bn was not included in the estimates,” said Mogajane. 

Kieswetter said the tax windfall was not only due to the high commodity prices over the past two years. He said the tax performance was more broad-based, with sectors such as manufacturing, logistics and telecom also performing well. 

The government also managed to register 1.47-million taxpayers who were lapsed or unregistered and collected R3.6bn. Sars also succeeded in detecting VAT refund fraud of about R30bn. Kieswetter says overall, the various measures to close loopholes and leakages brought in revenue of R144bn. 

Kieswetter said together with his leadership team, they were on a mission to bolster Sars capabilities by employing data and technology, but had a long way to go after a period of being hollowed out by state capture. “Sars has not even reached the halfway point of rebuilding itself following the period of state capture.”

The post-budget speech dialogue also consisted of a panel discussion between economic analyst Thabi Leoka and political analyst Sithembile Mbete, and moderated by former journalist Nikiwe Bikitsha. Leoka said she was surprised by what the government had done with limited resources, pressured in part by high debt-servicing costs. “We are a consumption-driven economy. We consume resources we could be putting into promoting investments and creating jobs,” said Leoka. 

“SA does not have a money problem, it has an administration problem,” said Mbete. She said SA needs to address administrative issues in government functions such as home affairs and other service delivery points. She pointed to former public service & administration minister Ayanda Dlodlo’s reply to a parliamentary question, saying as much as 70% of SA’s 1.3-million civil servants have used sick leave — a trend which points to high absenteeism.  

The dialogue took place just over a week into the start of Russia’s invasion of Ukraine, ahead of the vote at the UN, where SA abstained. “SA cannot sit on the fence forever. At some point we will have to pick a side,” said Leoka.  

This article was paid for by Deloitte Africa.