The shock contraction of gross domestic product (GDP) in the first quarter will mean a downward revision of optimistic predictions for growth in 2018, Finance Minister Nhlanhla Nene has said.
Nene on Friday addressed the Directors Event, a conference attended by some 300 business leaders in Sandton, where he warned the audience that the risk to growth in South Africa "remains high".
"The contraction in the first quarter means that upward revisions to our growth forecasts by many public and private economists, and multi-lateral institutions such as the International Monetary Fund, will have to be revisited," he said.
Statistics SA announced on Tuesday that the country's real GDP fell by 2.2% in the first quarter of 2018, after poor performances from the agriculture, mining and manufacturing sectors.
Prior to the release of the first quarter GDP figures, Goldman Sachs forecast the SA economy would grow by 2.4%, while Harvard's Centre for International Development predicted 4.9% growth annually until 2026. Treasury pencilled in 1.5% for 2018.
Nene said government was "keenly aware of some of the key constraints to growth" and that it was "redoubling its efforts to enact reform that unlocks productivity, increases competition and lowers the costs of doing business".
"The National Treasury estimates that should the global environment remain supportive, the effective implementation of reforms in areas such as agriculture, competition policy, telecoms, tourism and others, will add up to… three percentage points to real GDP growth in the coming decade."
Nene added that government had shown its determination to enact structural reforms with sweeping changes to state owned enterprises (SOEs) since January.
Nene referred to the CEO Initiative and Youth Employment Service (YES) initiative as examples of how effective solutions can be when social partners work together.
"We cannot hope to ignite growth and employment without you," he said.
Government understands it has to play a role in allowing a stable platform for growth by maintaining fiscal responsibility, he added.
"This has required trade-off amongst the many spending priorities that we have.
"If we do not, however, contain expenditure, we are going to spend increased amounts on interest costs threatening service delivery."
The slogan adopted by President Cyril Ramaphosa, "Thuma Mina" (send me), was on display at the conference. Delegates were encouraged to wear lapel buttons sporting the hashtags "Count Us In" and "Send Me".
The president of Business Unity SA, Jabu Mabuza, delivered the Chairperson’s address, and advised companies to prove their social value to the country.
"We cannot pretend to exist outside our social context. We cannot pretend that if we provide regular returns to our shareholders, and create a decent number of jobs, we’ll be all right.
"It’s quite possible that the survival of the market economy – market capitalism as we know it – depends on this very thing," said Mabuza.