Welcome remarks at the Provincial and Municipal Economic Review and Outlook Seminar 2019

5 September 2019

Welcome to the “Provincial and Municipal Economic Review and Outlook Seminar 2019”, which feels like the official kick-off of our annual integrated budget and planning process for Budget 2020/21.

The Provincial Review and Economic Outlook – and its twin the Municipal Economic Review and Outlook – are annual research publications aimed at informing policy makers, departments and municipalities on key economic issues, which will impact on policy, planning and budgeting in the Western Cape.

They are world class documents and are key sources of economic intelligence to enable the integrated planning and budgeting process to assist us to maximize service delivery for all the people in the Western Cape.

We should all be proud of the Provincial Review and Economic Outlook – and its twin the Municipal Economic Review and Outlook – and the people who work so hard to prepare them here at Provincial Treasury in the Western Cape.

Outlook

We are in deep economic trouble in South Africa.

We have:

stagnant economic growth, with the economy forecast to grow at an average of about 1.5% over the medium term in South Africa.

We have:

declining per capita incomes, as the population growth rate exceeds the economic growth rate, which means the poor are getting poorer in South Africa.

We have:

staggering levels unemployment, with nearly 10 million people who do not have jobs, or who have given up looking for jobs, in South Africa.

We have:

eye-watering national debt levels, with national debt that will now almost certainly exceed an estimated R3.4 trillion, or 59% of GDP, in 2021/22 in South Africa.

Worse, we have state-owned enterprises, such as Denel, South African Airways and Eskom, swallowing billions of Rands in bailouts in South Africa.

And, finally we have:

the rating agencies circling us like sharks, with Moody’s Investor Services about to push the “red button” and downgrade our sovereign credit rating to “junk status” in South Africa.

Impact

We have worked hard, over the past ten years, to create an enabling environment for the private sector, and the markets, to drive economic growth and job creation in the Western Cape.

And we are going to have to work hard, over the next five years, to ensure that we grow the provincial economy at a higher rate than the national economy in the Western Cape.

We are currently piloting an “economic war room” to drive economic growth and create jobs in the Western Cape.

But the full horror of the national government’s mismanagement of the economy, mismanagement of our public finances and mismanagement of our state-owned enterprises, will have major implications for the economy, most immediately, in the form of large budget cuts, which risks severely compromising service delivery the Western Cape.

The scenario, we now face includes budget cuts of 5 per cent, or R2.8 billion, in 2020/21, 6 percent, or R3.5 billion in 2021/22 and 7%, or R4.3 billion, in 2022/23.

We are committed to fighting these budget cuts, and I have already written to the Minister of Finance, Tito Mboweni, demonstrating the impact of these potential baseline reductions on service delivery and the lives of people in the Western Cape.

Seminar

But the point is that we will be conducting our integrated budget and planning process in a constrained environment in the Western Cape.

So the “Provincial and Municipal Economic Review and Outlook Seminar 2019” is vital in the Western Cape.

Because:

- it provides an opportunity for key stakeholders in the economic, policy, research and strategic planning space to connect, discuss and identify the key trends and possible implications of these trends;

- it provides an opportunity for provincial treasury to receive input and feedback from key stakeholders; and

- ultimately it provides for better decision-making in the constrained environment in the Western Cape.

Conclusion

In the end, we believe the Provincial Review and Economic Outlook – and its twin the Municipal Economic Review and Outlook – are assets that:

- can provide consistency in the data used by the province in its integrated planning and budgeting process; and

- can be used as a strong foundation for the formulation of the provincial and municipal strategic planning documents in the Western Cape.

I wish you all fruitful discussions and engagements here today and, again, want to thank all of you involved in the compilation of these documents for your hard work.

I thank you.

Issued by David Maynier, Minister of Finance and Economic Opportunities, 5 September 2019