The most important issue that Minister of Finance Trevor Manuel should address in his medium-term Budget policy statement — to be delivered in Parliament on Tuesday afternoon — is economic growth, says South Africa’s opposition leader Tony Leon.
Manuel should set a firm timetable for the elimination of exchange controls to:
- “encourage currency stability and foreign investment”;
- expand capital-gains tax exemptions on property transactions to encourage domestic investment;
- provide tax relief on retirement funds to encourage higher domestic savings;
- create tax deductions for businesses and households on employees’ salaries to encourage job creation; and
- review value-added tax on medicines and books “in order to lower the costs of health and education”.
In a statement, Leon said the sluggish pace of economic growth in South Africa over the past decade, which had held back job creation, remains the major failure of a government that has otherwise managed the country’s finances well.
Leon noted that of the 25 emerging-market countries whose economic progress is measured weekly by the Economist, South Africa is in last place when it comes to economic growth.
“This week we are listed at a rate of 2,5% growth in gross domestic product [GDP], below even such conflict-troubled nations as Israel (3%) and Columbia (4,3%). Even the expected statistical revision upwards of 15 to 20% would still place us at or near the bottom of the list.
“On the most important measure of the actual wealth of ordinary South Africans, per capita GDP, our country has seen an average annual growth rate of only 1% in the past decade.
“Granted, this is better than the negative growth rate of 1% which we experienced in the decade leading up to 1994.
“Yet it is time for us to stop comparing today’s economic performance with that of the apartheid siege economy. We must start measuring up to our contemporary competitors in the developing world, as well as to our own self-prescribed targets, such as economic growth of 6% a year,” Leon said. — I-Net Bridge