South African Business Leaders Urge ‘Tough Budget’ to Trim Fat

Lobby group Business Leadership South Africa has listed key reforms it views as necessary to fast-track growth in a letter to Finance Minister Tito Mboweni before his medium-term budget policy statement next week.

In the letter, made public on Thursday, the organization calls for tougher measures to achieve fiscal sustainability. Mboweni should outline how he will trim fat in the form of tighter management of the public-sector wage bill and focus on revenue-collection efficiency, Business Leadership South Africa said. It’s time to set out how state-owned companies will be weaned off subsidies and bailouts, it said.

“Expenditure on the compensation budget must fall toward 10.5% of gross domestic product from 14.2% this fiscal year,” the group said. “Business wants to hear some detail at the medium-term budget policy statement to reduce doubt and aid planning for the year ahead in such uncertain times.”

President Cyril Ramaphosa unveiled a recovery plan just over a week ago intended to help lift the economy out of recession and reduce high unemployment levels, while committing to tackling corruption. The government targets average growth of 3% over the next decade and plans for energy security to be restored in two years.

The government should increase its use of private-sector expertise as it pursues an economic recovery, the business group said. For example, businesses could fund and develop their own energy projects to provide electricity for themselves and for sale to others to reduce the nation’s power shortfall, it said.

“Government simply needs to stand out of the way, change its mindset (and make some small amendments to regulations) and allow others to solve the problem,” it said.

The state should also crack down on illicit trade to boost tax revenue, amend the country’s key-skills visa list to allow businesses to hire the expertise needed and permit greater private-sector participation in getting a 2.3 trillion rand ($141 billion) infrastructure program going, BLSA said.

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