Noelani King Conradie

1
Parliament Portfolio Committee on Finance Comment
on MTBPS
Noelani King Conradie NKC Independent
Economists 28 October 2005
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Euphoria over state of domestic economy

• Strong GDP growth of 3.7 in 2004
• Interest rates at record lows
• Property prices soared 250 since 1997
• JSE at close to record highs
• Sales of new vehicles at 30 per annum
• Consumers have never had it so good

3
Some weaknesses however still exist

• Current boom driven by strong consumer-led
  domestic spending
• Production and export-led growth is lacking
• Cannot achieve 6 sustainable growth on strength
  of consumer-led spending even if supplemented by
  higher state infrastructure spending
• Increased infrastructure spending very positive,
  but what happens after 2010?

4
National Treasury macro forecast
5
Household Debt to Disposable Income vs Savings
to Disposable Income
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Strong Portfolio Flows
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Foreign Direct Investment as of GDP
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Disappointments

• Indications that corporate tax rates will not be
  reduced
• enough room in budget to cut taxes without
  cutting spending or driving deficit higher
• would cut cost of doing business in SA
• enhance our investment prospects
• No further incentives to stimulate SMEs

9
Geared to grow?

• From deficit perspective not expansionary
• Not enough worthy projects to fund
• Confirms lack of skills, capacity and managerial
  ability in certain key areas
• This is our biggest problem and challenge we have
  yet to face
• Shift from social spending to infrastructure and
  economic services indicative of expansionary
  budget

10
Domestic drivers needed

• More power stations
• More roads
• Better functioning ports and railways
• Better municipal infrastructure
• More flexible labour markets
• Reduced legislative cost burden for employers
• More skilful public sector
• Efficient administration and competent
  professional services in education, health and
  policing

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Thank you!
Noelani King Conradie NKC Independent
Economists [phone] 082 8544
130 noelani_at_nkc.co.za