Politicians and economists have reacted to Tuesday’s Medium Term Budget Policy Statement (MTBPS), tabled by Minister of Finance Trevor Manuel in Parliament on Tuesday.
What economists say
George Glynos, market analyst at Econometrix Treasury Management: “One has to say that it was a relatively optimistic and fair speech. It was also relatively brave in some respects. We’ve seen the first decent step in a while to abolish exchange controls. It seems that the market has responded relatively well to it.
“It shows the government’s confidence in the South African economy — not only to promote growth and attract foreign investment — but also shows it has confidence that local companies will want to keep a significant portion of their savings invested locally.”
Nico Kelder, economist at the Efficient Group: “The only major thing that I picked up was the exchange controls, which were relaxed on companies … What I understand is that exchange controls on companies have been lifted.
“This is a good thing as it shows the government has the same confidence that the rest of the world has in South Africa. It shows the government does not think it has to protect the currency against outflows, but rather that it thinks the currency can hold it own if there are outflows from companies.
John Loos, economist at Absa: “The budget was very much as expected, I had expected the wider deficit to fund the high capital expenditure. The exchange-control relaxation is very much welcome and I think it sends out a signal that the government is committed to abolishing exchange controls.
“My big concern with the Budget remains the rapid growth in the social security and welfare spending. I think this indicates that we are not yet adequately solving the poverty problem.”
Johan Botha, economist at Standard Bank: “I think most people are not quite surprised by what the minister said. As he keeps indicating, the idea is to keep changes minimal, and this time round there were no major surprises — I’m happy with this. I don’t think there’ll be any major impact on the foreign exchange market, because this is a gradual relaxation process. That is the way he had said he would do it.
“However, I think the foreign-exchange market may be a little disappointed but the impact would be quite marginal.”
Colen Garrow, economist at Brait: “The highlight for me is the amount that corporates can take offshore —
there is no limit and for the long term that will be positive for the balance of payments as there will be a repatriation of the income earned on these assets.”
Jac Laubscher, Group economist at Sanlam: “The meaningful rise in the PSBR over the next few years could put upward pressure on bond yields unless the cash flow to institutions improves. It was not a surprise to see the spending numbers rising, as government had been making noises about a more expansionary fiscal policy.
“Also, themacroeconomic forecasts used are more realistic than previous forecasts, improving the credibility of the assumptions, although the recovery in exports from 2005 looks a bit unrealistic.
“The easing in foreign exchange controls for companies was the big surprise, and signals a very strong degree of confidence that investment opportunities in South Africa can compete with the opportunities offshore. I like this move.
“They will probably be leaving the easing for individuals until after the amnesty process has been completed. The amnesty estimate of R65-billion is a large amount, and the R2,2-billion in levies indicates that a large percentage of the money is flowing back into South Africa. This could help explain part of the large amount of unrecorded transactions in the BOP.”
What politicians say
Pieter Mulder, leader of the Freedom Front Plus: “I am concerned about senior citizens. Now they have to wait for February to address the issue of low interest rates and reforms of the retirement-fund industry. I am also a little worried about the social welfare system, which is under strain at the moment.
“We must put emphasis on infrastructure spending and less on welfare spending. We are not a welfare state yet.”
Kraai van Niekerk, agriculture spokesperson of the Democratic Alliance: “There was too little money for land reform. What I heard was R200-million (was allocated), which is not near enough. We need R2-billion a year. I also think the R400-million or so for drought relief is problematic as some provinces have not put in requests for money.”
General Bantu Holomisa, leader of the United Democratic Movement: “The government seems to be systematically trying to address the concerns about foreign exchange. This will please some.”
Raenette Taljaard, Democratic Alliance finance spokesperson: “It was a mixed bag, including the statements on exchange control liberalisation, but concerning statements about the rapid uptake in social grants in a context of jobless economic growth.” — I-Net Bridge