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SA’s next phase of growth pivots on dynamism of business – Nene

Finance Minister Nhlanhla Nene

Finance Minister Nhlanhla Nene

13th November 2014

By: Terence Creamer

Creamer Media Editor

  

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Finance Minister Nhlanhla Nene says the coming two years are likely to be “challenging” for South Africa as government moves to rebuild the fiscal space that has been exhausted through actions taken to stimulate the economy following the global economic crisis. But he told members of the American Chamber of Commerce on Thursday that the National Development Plan (NDP) offered a credible platform for transitioning the economy to a faster-growing and more inclusive economy.

Fiscal consolidation, he stressed, could no longer be postponed and the expenditure ceiling had, thus, been lowered by R25-billion over the coming two years, along with growth expectations. The National Treasury expected the economy to expand by only 1.4% this year, 2.5% in 2015, 2.8% in 2016 and 3% in 2017, which was well below the 5% aspiration set out in the NDP.

Nene said that government’s commitment to rein in debt and expenditure also meant that the next phase of growth would need to lean heavily on the “dynamism and agility” of business and on extracting greater synergy between the actions of the public and private sectors.

“Business is a key partner in ensuring that the NDP becomes a reality: adding value, innovating, fostering technological progress and knowledge transfer, and creating jobs,” Nene said.

One of the two major priorities for the coming period was encouraging greater private sector investment, with the other being an improvement in the State’s capacity to monitor and implement policy.

Government was especially keen to crowd-in private investment to help deal with prevailing infrastructure constraints to restore a greater balance between public- and private-sector contributions to gross fixed capital formation – an area where the public sector’s contribution was currently dominant.

Nene saw particular potential for the drawing in of private capital in the electricity sector, where shortages “had reduced the incentive for firms to invest”.

The independent power producer (IPP) procurement programmes, which had hitherto focused on renewable energy, would be expanded to included 2 500 MW of coal baseload and 800 MW of cogeneration. Nene also indicated that the National Treasury was part of government processes to finalise the update to the Integrated Resource Plan, which could unlock further IPP prospects.

There was also a desire to attract private sector skills into the municipal infrastructure environment, with Nene making specific reference to a plan by business to establish a “shared services” talent pool to support under resourced municipalities.

Business Leadership South Africa indicated recently that the new “vehicle” would enable the public sector to tap “latent” private sector skills in a way that helped address gaps in the planning, execution and maintenance of infrastructure.

The model would also seek to address the shortcomings of previous efforts to draw in retirees and other private-sector talent to support municipalities.

The concept was canvassed at an October 24 meeting of the Presidential Business Working Group and business proposed to table an implementation plan and operational model at the next meeting of the Presidential Infrastructure Task Team.

Nene said greater public-private consultation and collaboration was envisaged, with business to meet with the Presidential Infrastructure Coordinating Commission on a quarterly basis. “Bolstering confidence, trust and dialogue between public- and private-sector stakeholders is critical.”

Edited by Creamer Media Reporter

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