Setting the groundwork for a transparent and financially-sound future is what the recently delivered Gauteng 2023 Medium Term Budget Policy Statement (MTBPS) intends to achieve. Leadership magazine sat down with the MEC for Finance in Gauteng to unpack more.
On 28 November, the MEC for Finance in Gauteng, Jacob Mamabolo, delivered a Medium-Term Budget Policy Statement which was nothing short of the assertion and emphasis on increasing the economy of the province, through the Growing Gauteng Together 2030 priority goal. Gauteng is Africa’s largest economic hub and contributes 35% to the GDP. With that in mind, the provincial treasury continues to focus on ensuring that the economy grows to reach the projected 35% plus goal. To accelerate the fruition of this goal, the government identified focus areas of priority to enable economic growth
As the saying goes, to make money, one must spend money, but the MEC is confident that the 2023 main budget adjustment from R158.9 billion to R163.5 billion will contribute to curbing challenges that affect economic growth in the province.
“The Adjustments Budget is seldom about the introduction of new priorities, as it is primarily about providing for unforeseen and unavoidable expenditures, as well as the formalisation of commitments that were not pencilled into the Main Appropriation, such as the energy projects,” MEC Mamabolo said.
According to the MEC, there is a growing need to focus on building private-public partnerships with the major economic sectors such as the financial, rail, transport, retail, and technology sectors, the road to economic growth is distinct. Much of South Africa’s finance and business services industry is concentrated in Gauteng. Exports of services like banking services are accounting for a growing share of global trade due to digitisation. South Africa already exports banking services to the rest of Africa. As the continental economy grows, Africa’s need for banking services expands, which increases the market for Gauteng’s digital services. Enhancing private-public partnerships, supporting the digital economy, and supporting the SMEs, particularly those responsible for township economic growth, is vital.
The 2023 economic outlook: Ominous yet hopeful
The state of the economy outlook for 2023 has worsened, mainly due to, amongst other things, the damaging impact of intense loadshedding, persistent domestic logistical constraints, lower commodity prices, and subdued global demand. The weaker growth outlook for China, South Africa’s largest trading partner; the lower commodity prices; and the risk that the US interest rates will remain higher for longer, which means the global economic environment is less supportive of South Africa’s growth prospects, also play their part. As a result, the Gross Domestic Product (GDP) is projected to slow from 1.9 percent in 2022 to 0.8 percent in 2023. As indicated by the Minister of Finance in his speech, “Our public finances are significantly weaker”.
“According to Stats SA, our province contributed R1.42 trillion to South Africa’s GDP of R4.16 trillion in 2022. In other words, the province was responsible for R33 out of every R100 the South African economy produced. The Gauteng economy is primarily driven by finance, real estate, and business services sectors, as well as the transport and communication industry. It is important to note that, as we gather here today, the economy of Gauteng is larger than the economies of KwaZulu-Natal and the Western Cape combined. As the economic hub, Gauteng is an important channel for the transportation of goods to the rest of the country. We are a gateway to the rest of the African continent and the global export markets. In the period between 1995 and 2022, this province accounted for the largest share of the country’s exports. On average, Gauteng exports as a share of total South African exports was 61.1 percent. In 2022, the share was 71.3 percent, the most significant for the province since 1995.
“Much of South Africa’s exports of manufactured goods are also purchased by other African countries. Manufacturing is another industry of which Gauteng accounts for a significant share. Therefore, if the African economy performs well, demand for Gauteng’s exports will likely grow.”
The MEC is confident that the opportunities presented by the African Continental Free Trade Area (AfCFTA) will boost trade and economic growth. It is inevitable that the deep integration that AfCFTA promises will build resilience and lower the barriers that currently impede economic growth in our continent. It therefore comes as no surprise that Gauteng is currently regarded as the premier terminus for employment opportunities, as confirmed by Stats SA.
Medium to long-term focus areas for economic growth
Understanding that loadshedding is a thorny issue that keeps us awake as the leadership of the province and the country at large. The Gauteng Provincial Government has agreed with City Power, an entity of the City of Johannesburg Metropolitan Municipality, and has already concluded a Memorandum of Understanding (MOU) for City Power to act as the implementing agent in providing residents of the province with power generation solutions to improve the on- and off-grid solutions such as leveraging renewable technology. City Power will assist the province in building power generating capacity, including delivering 100MW to the grid within the next year, to address challenges of energy availability in Gauteng as part of the Provincial Alternative Energy Plan. The signed agreement seeks to support infrastructure systems to ensure a stable supply of water. Water shortage in some parts of the province is not due to drought but rather constant loadshedding which slows down the water pumping system from the reservoir.
The MEC is confident that energy and water infrastructure remain critical to boost positive investor sentiment and grow the economy, and these focus areas will make certain of that. It is for this reason that an amount of R441 million has been allocated to COGTA as an investment toward the implementation of the Gauteng Energy Plan.
Supporting SMMEs for economic growth
The passing of the Township Economy Development Act, which will focus on supporting SMMEs, is a step towards the province’s economic development. The provincial government continues to leverage procurement to drive the empowerment of township enterprises. A traversed approach by the province over the past four years registering township businesses on the Central Supplier Database (CSD). This has resulted in Gauteng Provincial Government spending R12.7 billion procuring goods and services from township suppliers including companies owned by the youth, women and people with disabilities. The government plans to ensure holistic inclusivity by warranting accessibility to economic activities by all enterprises.
Speaking with passion for economic inclusion, Mamabolo outlined that “ through the township SMME support, liquidity and cash inflows into Township Enterprises and households, especially among the most vulnerable individuals, such as the youth, women and people living with disabilities, we are eradicating poverty, inequality, and unemployment.”
Sustainable private-public partnerships
Mamabolo is confident that forging sustainable private-public partnerships with major economic sectors, such as the financial, rail, transport, retail, and technology sectors, the road to economic growth is distinct. The recently launched Roundtable Partnership with Private Sector Chief Financial Officers is a private sector-led initiative to unlock significant private sector resources, invest them into Gauteng’s economic landscape, and strategically influence the province’s economic growth. The roundtable constitutes the Chartered Institute of Business Accountants (CIBA), Standard Bank, and the Chartered Institute of Government Finance Audit and Risk Officers (CIGFARO
This collaboration is established to enhance investor confidence and grow improved GDP. The private sector CFOs signed pledges as a gesture of confidence in the province, emphasising that good governance and well-managed public institutions have great potential.
“The government must work with the private sector and equally government must create an enabling environment to strengthen the relationship going into 2024 and beyond. Cutting red tape in municipalities carries great potential to improve investor sentiment and make it easier to do business in municipalities. I am pleased to announce that Gauteng Provincial Treasury commissioned a project manager to analyse the details of improving red tape in municipalities.
Revenue collection
Taking into consideration of the increasing imperative to do more with less resources given the in-year cuts on Conditional Grants and even more deeper cuts on Equitable Share, revenue collecting departments must intensify revenue enhancement efforts and explore alternative sources. Departments and municipalities are expected to enhance own revenue collection in the province by implementing initiatives such as enhancement of banking initiatives for revenue collected to ensure motor vehicle licence revenue collected is immediately deposited and reflect into the provincial government fiscus; enhancement of driver’s licence testing centres across the province; new casino regulations transitioning from a flat tax structure regime of nine percent to a proposed flexible sliding scale tax structure ranging from eight to 15 percent; new nine Bingo licenses by the Gauteng Gambling Board, as part of a strategy to infuse transformation in the industry by introducing new players from previously disadvantaged groups and secondly as a form of revenue enhancement strategy and the e-Commerce or cashless rollout which will allow liquor traders to view their bills electronically and make payments online through a mobile payment application.”
Clearing the legacy hanging cloud and fiscal reprioritisation
“It is imperative and necessary that working together with national government, we bring to finality the implementation of the directive announced by the Minister of Finance in the 2022 MTBPS as it relates to the E-toll debt. To complete and conclude this policy pronouncement by the Minister of Finance, the gantries should be switched off, and be repurposed and repositioned for security, crime prevention, and roads-related law enforcement services.
“The province will therefore strengthen revenue generation capacity to put a compelling case to national government to switch off the gantries. We reaffirm our longstanding commitment to pay the debt, including augmenting our own provincial revenue without burdening the equitable share, especially priorities for social services such as education, health, and social welfare”.
Call for a positive contribution
“The initiatives we are announcing as adjusted interventions to grow the economy calls for all of us to make a positive contribution and put a ‘brick to build’ the economy of the province. As a province that gives concrete and practical meaning to the golden principle from our country’s Constitution of ‘Unity in Diversity’, thus making us a culturally diverse province, or, as our martyrs called it, the Rainbow Nation, it is important that we build an economy that can only serve to unite the diverse nation. Failure to put a ‘Brick to Build’ carries the elevated risk of imploding the Rainbow Nation, instead of harmonising it. Let us strive to not focus on disqualifying negativity. To the residents of Gauteng, let us continue to work together to implement programmes and projects to grow our economy and create jobs, fight crime and other social ills, with the focus on building the Gauteng of our dreams.”
