DA warns of poverty ‘wasteland’ without GDP boost

South Africa’s Democratic Alliance has proposed reforms to bolster economic growth and called for a spending review after it blocked a surprise plan to hike value-added tax, delaying the presentation of the annual budget.

While the National Treasury — overseen by Finance Minister Enoch Godongwana of the African National Congress — last week sought to increase VAT to 17% from 15% to help fund spending priorities, the second-largest political party objected and said the focus should be on growth-enhancing reforms.

“It is now five minutes to midnight for our economy and the fiscus,” DA leader John Steenhuisen said in an opinion piece in Business Day Monday. “In the short term, we can absorb the shortfalls we face, but unless we generate the growth required to shift our trajectory, we risk being unable to fund even the most basic needs of of our people, and abandoning them to a wasteland of poverty from which there is no escape.”

Gross domestic product in Africa’s most industrialized economy expanded by an average of less than 1% annually over the past decade and an era of government graft, mismanagement and bailouts for under-performing state companies weakened public finances.

Godongwana — who will now present the budget on March 12 — should include clear timelines for private-sector participation in the beleaguered electricity, port and rail sectors in the revamped plan, Steenhuisen said in the Johannesburg-based newspaper.

A member of the nation’s coalition government, the DA also wants the administration to accept a “free regulatory review” from the World Bank to help cut red tape and an immediate reduction in tariffs that weigh on the competitiveness of local manufacturers. There should also be labor-market reforms to boost employment and changes to public-procurement processes to promote transparency and cost savings, Steenhuisen said.

South Africa’s black-ownership rules compel companies to allocate a 30% shareholding to historically disadvantaged groups. To encourage investment and lift growth, the state should make equity alternatives available in place of these ownership requirements, as it has done in the automotive sector, Steenhuisen said.

The Black majority was largely sidelined from the mainstream economy during White-minority rule and the ownership law was introduced after apartheid ended in 1994 to bolster their participation.

The DA, which joined the ANC and eight smaller rivals in a so-called government of national unity after last year’s elections failed to produce an outright winner, also wants an urgent spending review to identify ways to free up money and reorient funding toward critical priorities that deliver value, Steenhuisen said.

While the last-minute decision to postpone the budget was “unfortunate”, properly addressing the concerns raised by different political parties is essential, President Cyril Ramaphosa said in a weekly letter Monday .

“The reality is that we strive to implement our national priorities in a context of slow growth, limited revenue, high unemployment and a large social wage,” he said. “The state is simply not able to fund every priority and ambition.”

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