NWU Business School

Experts debate the fiscal future of South Africa

BELINDA BANTHAM — Tue, 10 Jun 2025 12:53:05 +0000

Experts debate the fiscal future of South Africa

BELINDA BANTHAM Tue, 06/10/2025 - 14:53

A lively panel of experts provided a critical analysis of Minister Enoch Godongwana's Budget address during the Pitso 2025.4 discussion of the North-West University (NWU) Business School. These experts advocated for significant changes to the way South Africa creates and oversees its national budget, calling for transparency and accountability in policymaking.

The discussion was moderated by columnist Khaya Sithole, and the other speakers were political scientist Prince Mashele and economist Prof Jannie Rossouw from the University of the Witwatersrand.

Prof Rossouw highlighted a crucial requirement that goes beyond financial procedures. He said, "What we need in South Africa is consequence management – at every level,” underlining the ongoing problem of a lack of accountability in many government sectors. He criticised the current governance system, claiming that audit results have lost their significance due to poor follow-through. "It really makes a mockery of the audit report if we see no consequences," he said.

Prince Mashele gave insights into how South Africa's budget process worked prior to the current Government of National Unity arrangement. He claimed that the process would end with decisions being "rammed down our throats" via TV broadcasts, with no chance of political party involvement or public participation.

“Now that politics have changed, the ANC can no longer do it that way, so one thing that must be implemented going forward is transparency. The minister must actually appear in public and outline the budget pillars, and then the political parties must respond to him,” he stated. “Society must also be given a chance to discuss it so that when the budget is eventually presented in Parliament, it is a result of some kind of national consensus.”

Further, Sithole remarked on the budgetary burden that ordinary citizens carry, pointing to the petrol price and unadjusted tax brackets as indirect tax increases. “Either through the fuel levy or through the lack of adjustment of personal income tax brackets, we are paying the price.” This sentiment was a call to adopt a budgeting framework that prioritises fairness and economic well-being over administrative convenience.

In his response, Prof Rossouw stated that South Africans need to see decisive leadership. “We need our President to wake up and start firing incompetent people and getting service delivery going.” His remarks were in line with a broader concern that accountability systems will stay theoretical without political will to implement change.

As the budget passes through the legislative process, Sithole anticipates that the upcoming weeks will provide key details on the aims of the present administration and whether "even its own GNU partners are indeed going to sign up for that".

The panellists agreed that change is necessary for South Africa's budgeting process. Restoring public trust and correcting the nation's economic decline require greater responsibility, stronger leadership and more openness.

Economic recovery needs maximum support to strengthen upturn

BELINDA BANTHAM — Wed, 04 Jun 2025 06:46:12 +0000

Economic recovery needs maximum support to strengthen upturn BELINDA BANTHAM Wed, 06/04/2025 - 08:46

The disappointing gross domestic product (GDP) growth figure of 0,1% for the first quarter of 2025, released by StasSA on 3 June, comes as no surprise, as it merely confirms several months of muted high-frequency economic data that pointed to this likely outcome.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says although adverse global developments earlier this year have also played a role, the weaker economic data was already apparent before then.

“For example, the ABSA Purchasing Managers’ Index for May, although showing some recent signs of business activity and demand improvement, has remained in contractionary territory for seven consecutive months. The key manufacturing sector is likely to continue to be a lagging one for now. This reality was already recently also presaged by several reduced growth forecasts for 2025, including by the National Treasury (1,9% to 1,4%) and the South African Reserve Bank (SARB) (1,7% to 1,2%).”

Prof Parsons explains that if present trends persist, the growth outlook for this year now seems likely to be only about 1%, possibly rising to about 1,5% in 2026.

He says it is clear that the incipient economic recovery in South Africa is at present struggling to gain momentum and needs maximum support to strengthen the business cycle upturn.

“The latest growth figures therefore again inject renewed urgency into the need to pivot South Africa’s growth strategy in ways that make better growth prospects possible. Gross fixed capital formation was also negative. The poor performance of fixed capital investment as a key driver of growth raises a notable red flag, as capital investment is the kingpin of the growth rate.”

According to Prof Parsons, it also emphasises the importance of speeding up the large-scale infrastructural spending to which official policy is already committed. “Accelerated structural reforms remain the best pathway to the overall 3% growth target of the Government of National Unity in the medium term, as well as to coping with external headwinds,” he

Reduction in interest rates can have a significant positive impact

BELINDA BANTHAM — Fri, 30 May 2025 08:09:17 +0000

Reduction in interest rates can have a significant positive impact BELINDA BANTHAM Fri, 05/30/2025 - 10:09

The widely anticipated decision by the Monetary Policy Committee (MPC) to resume its interest rate-easing cycle by reducing rates by another 25 basis points (bps) is the right one.

Prof Raymond Parsons, economist of the North-West University (NWU) Business School, says the MPC decision of 29 May is welcome recognition of the changed economic circumstances that have made this possible.

“While the MPC acknowledged the continued heightened global uncertainties facing the South African economy, it saw them as somewhat more settled for now. The majority view of the MPC therefore recognised the other factors that made it both desirable and practical to further cut borrowing costs for business and consumers at this key juncture in South Africa’s business cycle.”

According to Prof Parsons, even a small reduction in interest rates at this stage can have a big positive impact on the national economic mood and on confidence levels.

He says although it is recognised that monetary policy cannot do the heavy lifting in South Africa’s growth performance, lower borrowing costs are nevertheless supportive of South Africa’s incipient but weak economic recovery.

“The MPC has indeed reduced its 2025 GDP growth forecast from 1,7% to 1,2%, which is lower than the 1,4% growth assumption in the recent Budget. The reduced growth projections remain indicative of the extent to which the implementation of much-needed structural reforms must be expedited to basically improve South Africa’s growth prospects.”

Prof Parsons says the debate around a possible future lower inflation target of 3% that was outlined by Lesetja Kganyago, governor of the South African Reserve Bank (SARB), remains a significant one for future monetary policy.

“The path and target will indeed need careful design, good communication and – above all – wide buy-in. The SARB can hit its target for the wrong reasons, as well as miss the target for the right ones. Global research has confirmed that public support of inflation objectives and means is essential. Finance Minister Enoch Godongwana has also recently again emphasised that political support for monetary policy reform, such as a lower inflation target, must be built before it can be implemented,” he concludes.

Latest Budget provides foundation for building fiscal sustainability

BELINDA BANTHAM — Thu, 22 May 2025 07:23:01 +0000

Latest Budget provides foundation for building fiscal sustainability BELINDA BANTHAM Thu, 05/22/2025 - 09:23

Finance Minister Enoch Godongwana’s revised third Budget is a pragmatic one, given the current circumstances.

This is the view of Prof Raymond Parsons, economist from the North-West University (NWU) Business School. In commenting on the third Budget presented to Parliament on 21 May, Prof Parsons says that, as was stressed by the Finance Minister, various compromises and trade-offs have now been inevitable to achieve a workable balancing of the books that builds confidence.

“The commitment to spending reviews is also an essential one. The overall thrust of the third Budget shows a strong pivot in fiscal strategy towards growth and investment, which is where the basic solutions to South Africa’s public finance challenges ultimately lie. If fully implemented, the strong emphasis on infrastructural development bodes well for the 3% gross domestic product (GDP) growth in the medium term that is envisaged by the Government of National Unity (GNU).

Prof Parsons explains that both the role of Operation Vulindlela and the participation of private sector investment indeed remain indispensable to the successful delivery of key infrastructural outcomes, especially in transport, logistics, energy and water.

“The latest Budget has therefore provided a combined policy and project foundation on which to build South Africa’s fiscal sustainability over the longer term. With the debt-to-GDP ratio to be stabilised at a higher level of 77%, the margin for error continues to remain small. There are still future risks to fiscal policy – as is highlighted by the higher debt-to-GDP ratio and the warning that the 2027 Budget may have to consider new taxes.”

According to Prof Parsons, the good news is that this is now a GNU Budget, which is not only a plus for political stability, but should also ensure its subsequent passage through the various Parliamentary processes. He says what is also important to promote policy certainty is that the positive reforms in the Budget are speedily implemented and are also seen as irreversible. This includes the investment in the capacity of SARS to improve tax collection and revenues.

“The fact that the original assumption of 1,9% GDP growth this year that underpinned the Budget has been sharply reduced to 1,4% recognises the new global and domestic economic realities shaping South Africa’s growth prospects. While this assumption may still be on the optimistic side, the more conservative Treasury projection nonetheless simply confirms why the third Budget needed to be strongly growth-dominated.”

Prof Parsons explains that if South Africa wants to grow its tax base to enlarge its fiscal space, it needs a rapidly expanding economy in which job creation accelerates. “Taxpayers must see they are getting value for money, on which basis the Budget proposals need to win the trust and confidence of citizens,” he concludes.

Unemployment level raises red flag about weak growth performance

BELINDA BANTHAM — Wed, 14 May 2025 06:43:12 +0000

Unemployment level raises red flag about weak growth performance BELINDA BANTHAM Wed, 05/14/2025 - 08:43

The 1% rise in the unemployment level in the first quarter of 2025 raises another red flag about South Africa’s weak growth performance.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says with the gross domestic product (GDP) growth forecasts for 2025 having been progressively reduced by various institutions and economists to about 1,5% and below, it is not unexpected that this should now be reflected in higher unemployment levels.

“The overall total unemployment level is now where it was a year ago and youth unemployment in particular remains of an unacceptable magnitude.”

Prof Parsons says the latest rise in unemployment again confirms that economic growth in South Africa has been too low for too long.

“There is no magic wand to create jobs overnight, as the disappointing unemployment picture is the cumulative outcome of seasonal, cyclical and structural factors. However, the deteriorating employment outlook nonetheless reinforces once more the fact that the third Budget on 21 May must be a growth-driven one.”

According to Prof Parsons, the Budget needs to create a policy environment that promotes economic expansion and boosts investor confidence.

He says the Budget must be dedicated to policies and projects that demonstrably support the commitment of the Government of National Unity to at least 3% GDP job-rich growth in the medium term.

No increase in VAT is the right decision

BELINDA BANTHAM — Thu, 24 Apr 2025 13:59:59 +0000

No increase in VAT is the right decision BELINDA BANTHAM Thu, 04/24/2025 - 15:59

The decision by the National Treasury not to increase value-added tax (VAT) on 1 May is the right one in the current circumstances.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says after an intensive debate a rise in VAT was eventually seen to be unnecessary, and economically and politically it also failed to command wide support.

“An unchanged VAT rate brings welcome relief and certainty to business and consumers, and to that extent is confidence-building. However, this does not mean that, fiscally, South Africa is out of the woods. Future risks to fiscal policy remain.”

According to Prof Parsons, successfully managing these risks now depends on a credible fiscal strategy to balance the books being embodied in the third budget to be presented to Parliament shortly by the National Treasury. “Nevertheless, the advantages of the delayed Budget and the controversy that surrounded it are three-fold. Better options available were identified to balance the Budget on both its spending and tax sides, future Budgets will be subjected to a more intensive consultative process, and the urgent need for much higher economic growth was emphasised again.”

Prof Parsons points out that it is now even more necessary, especially given current global developments, for South Africa to speedily accelerate key structural reforms to expand the economy. “Fiscal sustainability needs to be reinforced by stronger economic growth that enlarges the tax base and hence boosts tax revenues,” he says.

Predicted growth not good enough for South Africa

BELINDA BANTHAM — Wed, 23 Apr 2025 10:00:42 +0000

Predicted growth not good enough for South Africa BELINDA BANTHAM Wed, 04/23/2025 - 12:00

The bad news from the latest assessment by the International Monetary Fund (IMF) of the impact of trade wars and policy uncertainty on the world economy is not unexpected. It nonetheless highlights the extent of the economic damage anticipated by recent unbridled United States of America (US) protectionism and its wider consequences.

In commenting on the latest update by the IMF on the world economic outlook, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says in cutting its 2025 global growth forecast from 3,3% to 2,8%, the IMF has warned that it nonetheless hides big variations across countries and is universally negative.

“While a global recession is unlikely, the IMF expects both emerging markets and developed economies to experience much slower growth, including the two biggest ones, namely, the US and China. The world economy is therefore clearly now less supportive of domestic economic growth. Moreover, the IMF has two forecasts of particular significance for South Africa’s growth prospects.”

Prof Parsons says the IMF has reduced South Africa’s 2025 gross domestic product (GDP) growth forecast from 1,5% to 1%, but is also projecting South Africa reaching a growth rate of only 1,8% by 2030.

“This is simply not good enough for South Africa, given its socioeconomic challenges. It falls far short of the target of the Government of National Unity (GNU) of wanting 3% inclusive growth in the medium term. High investment and job-rich growth require confidence in the future. There needs to be a renewed emphasis on accelerating key structural reforms.”

Prof Parsons says a strategic pivot in growth policy is urgently required to create the extra economic buffers and resilience needed to decisively deal with external shocks, and to ensure that tailwinds outweigh headwinds in 2025.

African economies should adapt to global challenges amid US-China tariff wars

BELINDA BANTHAM — Thu, 17 Apr 2025 06:29:35 +0000

African economies should adapt to global challenges amid US-China tariff wars

by Steve Maphakathe

BELINDA BANTHAM Thu, 04/17/2025 - 08:29

In a timely Pitso webinar hosted on Friday, 11 April, the North-West University (NWU) Business School featured distinguished panellists who discussed the vulnerable status of African economies caught in the crossfire of escalating international tariff wars. As countries on the continent compete for both economic sovereignty and competitive advantage, the discussion focused on how the economic power struggle between the US and China is changing trade landscapes throughout Africa.

The unpredictable nature of the present tariff environment was highlighted by Khaya Sithole, columnist and director of Regulatory Affairs at the Association of Black Securities and Investment Professionals (ABSIP). He cited the ongoing trade disputes between the US and China, where taxes on some imports have risen to a surprising 125%. Sithole said, "The first thing we are all going to check after this conversation is what the latest tariff rates are," stressing the unpredictable commercial landscape that African countries must navigate while formulating their economic policies.

Claude de Baissac, founder of Eunomix, emphasised the significance of geopolitical concerns and urged participants to get ready for a future marked by more uncertainty. De Baissac delivered a thoughtful evaluation, hinting at scenarios where the US might aggressively assert economic dominance. "We are no longer in a world where this is not going to happen," he warned, emphasising the need for strategic resilience in South Africa’s trade policies.

In turn, Stavros Nicolaou, group senior executive for Strategic Trade at the Aspen Pharma Group, addressed the critical importance of trade alignment for South Africa's economic health. He promoted a pragmatic approach to international commerce, stating: "A country like South Africa, with economic challenges, cannot afford to be partisan or parochial to any particular geography or region in the world. South Africa needs to fully understand trade patterns and it must be open to trading with everyone." Nicolaou's argument stressed the need to keep a variety of trade connections rather than aligning solely with one of the two economic superpowers.

Agricultural sector insights came from Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa, who proposed stronger ties with the United States. He said, "The best path for South Africa is to engage with the US on a free trade agreement," suggesting that in order to obtain favourable conditions, both parties would have to make concessions.

De Baissac provided critique of contemporary tariff diplomacy, particularly regarding the present US administration's approach. He claimed that, while reciprocal tariffs have traditionally been the foundation of international trade, US President Donald Trump is "abusing the term by calling it political tariffs" when they serve as instruments of economic coercion, intended to pressure international economic entities into accommodating American demands.

The perspectives of these experts illustrate a careful balancing of tasks that is necessary as African economies continue to strive for both the protection of domestic industries and integration into international markets. African nations need to develop smart and flexible strategies to withstand these economic imbalances caused by great powers competing with each other. At the same time, they should advance their own trade interests and sovereignty in a world economy that is becoming increasingly unpredictable.

Trump’s decision creates a window for negotiations

BELINDA BANTHAM — Thu, 10 Apr 2025 10:43:46 +0000

Trump’s decision creates a window for negotiations BELINDA BANTHAM Thu, 04/10/2025 - 12:43

The unexpected decision by President Donald Trump to suspend the reciprocal United States (US) tariffs on non-retaliatory countries for 90 days pending further negotiations has prompted a strong rebound in financial markets and a modification of previous gloomy economic forecasts.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says this decision now creates a welcome window of opportunity for many countries, including South Africa, to negotiate with the US for lower tariffs.

“South Africa, which has so far taken a careful and pragmatic stance on US tariffs, must now also seize the moment in a transactional manner to broker a better tariff deal in its trade flows with the US. For the automotive and agriculture sectors in particular there is much at stake should South Africa use the 90-day period to seek to ameliorate the negative impact of high US tariffs on their exports to that country.”

Prof Parsons says South Africa’s negotiation stance should be based on the likelihood that the African Growth and Opportunity Act (AGOA) will not be renewed. He explains that the probable pain of non-renewal or exclusion must be built into South Africa’s strategy.

“Countries like South Africa must therefore seek to get the best deal possible with the US. All the same, in assessing how valuable this additional breathing space will be for further negotiations, it would be prudent to avoid excessive expectations as to the eventual outcomes.”

According to Prof Parsons, there remains a high level of unpredictability in the US tariff situation and in the erratic way in which decisions continue to be made. It creates persistent uncertainty around business decision-making regarding investment and supply chains, which promotes a “wait-and-see” attitude.

“This is the overall policy environment within which affected nations will nonetheless need to negotiate with the US on tariffs and related matters. Bilateral negotiations may be distorted by the inclusion of non-tariff issues in the discussions and may also drive a wedge between countries, thus elevating economic uncertainty. Tariff uncertainty during the 90-day period can be as economically damaging as tariffs themselves.”

US tariff hikes are bad news for the South African economy

BELINDA BANTHAM — Thu, 03 Apr 2025 13:24:43 +0000

US tariff hikes are bad news for the South African economy BELINDA BANTHAM Thu, 04/03/2025 - 15:24

The scale of the further wide-ranging United States (US) unilateral tariff hikes announced by President Donald Trump will not only drive a huge wedge into the world’s multilateral trading system but is also bad news for the South African economy.

In commenting on President Trump’s liberation day announcement of wide-ranging higher tariffs on the world economy, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the international impact of much higher US tariffs will now be disruptive toglobal value chains. He says it will invite retaliation, ignite inflation, dampen world economic growth and prompt repricing of risks in financial markets.

“The world’s trading system is at a fork in the road and global reaction has understandably been highly negative. Tariff wars have a bad history. Whatever advantages may be thought to accrue to the US economy through much higher tariffs, beggar-my-neighbour policies have never been good news for the world economy.”

Prof Parsons points out that the collateral economic damage is usually high. All the economic evidence suggests there will be many more losers than winners as a result. Some economies may potentially be brought to the brink of recession, with accompanying job losses and even social dislocation.

According to Prof Parsons, the additional US tariffs therefore come at a growing cost and their unpredictability will heighten the pain. Even after the latest watershed announcement by President Trump, the US retains the right to swiftly and occasionally retract or reinstate tariffs. This uncertain environment created by the constant change in the rules of the game makes trade and investment decisions by business very problematical. Tariff uncertainty can be as economically damaging as tariffs themselves.

“Higher tariffs of 30% on South African exports to the US are also a serious headwind for South Africa. South Africa needs a calm and pragmatic approach grounded in evidence-based homework. The automotive sector will take a particularly hard hit. In seeking to manage higher US trade tariffs, South Africa must mobilise the necessary economic diplomacy to try to offset the economic damage and stabilise the situation. Given President Trump’s reciprocal approach to tariffs, South Africa must see what trade adjustments might be made to win concessions to ameliorate the situation.”

Prof Parsons says South Africa must also prudently seize the moment to begin to identify alternative markets as the US withdraws behind protectionist barriers. The isolationist direction of US trade policy is now abundantly clear and is the new normal. “For South Africa, the African Continental Free Trade Agreement (ACFTA) is one ready mechanism that seeks to reduce existing barriers to intra-Africa trade. African economies, including South Africa, will need to steadily integrate as the US pulls back. ACFTA must be given a much higher priority.

“Then, as the world economy is now likely to be less supportive of domestic growth, it becomes even more necessary for South Africa to demonstrate a strong strategic pivot in growth policy to offset the negative consequences of external shocks. The need to accelerate internal structural reforms is consequently extremelyurgent. Both government policy and business strategies will need to adapt to a new range of risks, and should also explorenew or alternative economic opportunities. To do so, South Africa must draw on the best advice possible to expedite and implement the necessary solutions.”