(Photo: Mariska Nanni / Maroela Media)
The government’s fuel levy relief, which costs the public coffers R15 billion, is made possible by the South African Revenue Service (SARS), which collects R24.7 billion above its revenue target of R1 trillion (1 000 billion). This indicates an improved fiscal position, which enables tactical responses to global shocks, says Busisiwe Mavuso, CEO of Business Leadership South Africa (BLSA).
She says South African markets have withstood global selling pressure better than others, with reform momentum setting the country apart from emerging peers in the market as the oil crisis continues.
Last week’s investment conference in South Africa also shows a commitment to reforms in the electricity, water and logistics sector, with the R2 billion investment target dependent on the delivery of real opportunities for private capital, says Mavuso.
Investment alone does not matter: What matters is whether it reduces costs and broadens capabilities, enables businesses to compete internationally and hire workers to reverse the unemployment problem.
“I am pleased that the government has heeded the call to mitigate the impact of the global oil price shock by temporarily easing the fuel price levy. This will reduce the blow to the economy from an uncertain global situation that businesses are trying to manage.”
Mavuso says the fact that the government had the ability to grant the relief is the result of hard work to boost its finances and the structural improvements being undertaken.
At the same time, the revenue service announced it had improved its target of achieving more than R2 billion in revenue. “This means the government’s overall debt outlook is more positive than it was a month ago.”
Economists estimate that the reduced fuel levy will lead to around R15 billion in lost revenue, but SARS collected more than the target and this helps to compensate for that.
“However, our economy faces serious obstacles. The war creates uncertainty while disrupting not only the movement of oil and gas, but also fertilizers and other industrial chemicals. As a result, inflation will be higher. Investors are worried and global markets are showing that they are withdrawing from riskier assets.”
Mavuso says South Africa’s own markets are affected with significant sales on the Johannesburg Stock Exchange (JSE), the bond market and the weakening of the currency.
However, this is less severe than what other markets have experienced. “All markets experienced selling pressure, but South Africa’s was relatively contained. Our reform momentum is what sets us apart from the rest of the world. South Africa still has a relatively good story to tell.”
She says that unlike the covid-19 crisis, when the government’s finances were troubled after the disastrous Zuma years, South Africa is now in a better position to overcome challenges.
“We need to be prepared for pressures on growth, for example from interest rates not falling as quickly as expected earlier this year. It is now more important than ever to be steadfast in delivering structural changes that will spur performance.”
“The situation globally is beyond our control, but the situation locally is within our control. We must use it and drive the policy shifts that will make our economy work better.”
This progress was showcased at the investment conference last week.
“President Cyril Ramaphosa and Parks Tau, the Minister of Trade, Industry and Competition, emphasized how the conference is taking place under much better conditions thanks to the reform agenda.”
Mavusa says Ramaphosa emphasized the importance of cooperation with the private sector and ending inefficient monopolies. “He referred to the water industry as one that is ready for private investment, with plans to create professionally managed water entities and build intensive infrastructure.
“He emphasized that the policy shifts are irreversible and irreversible. This means investors can trust our story, we can build confidence that we are on an improved trajectory and that we are a good place to invest.”
South Africa must now continue with the transformation of the power industry to create a competitive market and revamp the logistics system to ensure there is competition with new alternatives for ports and railways, she says.