NWU Business School

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.”

High policy uncertainty levels reason for unchanged interest rates

BELINDA BANTHAM — Mon, 24 Mar 2025 07:15:16 +0000

High policy uncertainty levels reason for unchanged interest rates BELINDA BANTHAM Mon, 03/24/2025 - 09:15

The decision by the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) to leave the repo rate unchanged highlights the role of non-model-based judgement in policy choices, especially in current uncertain circumstances.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says this decision that was made by the MPC on 20 March was decided by a 4 to 2 vote.

“Since the MPC’s previous meeting in January, highly elevated levels of global and domestic policy uncertainty have convinced a majority of MPC members to pause in its interest rate-easing cycle. The MPC now awaits greater clarity around these developments in the months ahead.”

Prof Parsons says from the MPC statement it is evident that inflation trends in South Africa are now basically converging around the 4,5% midpoint of the inflation target range – yet monetary policy is nonetheless still in restrictive territory.

“Scope therefore still exists for resumed cuts in borrowing costs for business and consumers later in the year. There also appears to be a minority view within the MPC that interest rates could still be further reduced to support economic recovery.”

He points out that on the growth front the MPC has slightly reduced its 2025 gross domestic product (GDP) growth forecast to 1,7%, and a similar 2026 growth projection remains unchanged. On the downside, the MPC sees risks to the growth outlook. At a time when South Africa needs to see much higher inclusive economic growth it is disappointing that the MPC has found it necessary to trim its 2025 growth forecast.

“It also suggests that the 2025 growth rate assumption of 1,9% in the amended Budget may be too optimistic. The MPC has already previously emphasised that only accelerated structural reforms can ensure that South Africa can reach the desired growth rate of the Government of National Unity (GNU) of 3% by, say, 2027.”

Pitso Webinar: Experts ask whether the budget will pass

BELINDA BANTHAM — Mon, 17 Mar 2025 06:39:42 +0000

Pitso Webinar: Experts ask whether the budget will pass

by Steve Maphakathe

BELINDA BANTHAM Mon, 03/17/2025 - 08:39

The Business School at the North-West University (NWU)’s second Pitso online seminar brought together economic experts to examine South Africa’s current financial situation. The discussion, titled Budgeting for Austerity, featured analyst and columnist Khaya Sithole, who moderated the webinar; independent economist Elize Kruger; and Sanisha Packirisamy, an economist at Momentum Investments. The trio discussed the government’s latest budget proposal delivered by Finance Minister Enoch Godongwana on Wednesday, 12 March, the challenges facing financial policy, and the potential impact on the country’s economic path.

Khaya Sithole opened the discussion by acknowledging the unstable financial landscape in which the budget was drafted. “We have had three weeks where everybody has been speculating about what might happen,” Sithole noted, pointing out that a large portion of the discussion was about generating income.

When questioned if the budget would pass, Elize Kruger maintained an optimistic tone. She acknowledged the complexities of the country’s Government of National Unity (GNU) but remained confident in its ability to find common ground. “I believe that the partners in the Government of National Unity will find each other,” she said. While she acknowledged that further negotiations and compromises could take place, Kruger emphasised that rejecting the budget adjustments, such as a 0.5 percentage point increase in VAT, would be harmful to political stability.

Kruger also highlighted a significant shift in governance, saying, “We need to look at expenditure in more detail. I did not see political will in the past 15 years, but now the situation has changed, and that could just be a positive for us looking forward.”

Sanisha Packirisamy took a conservative approach, warning that elements of the budget have historically remained unsettled even after being proposed. “Often in the past, some elements of the budget were not actually concrete by the first of April,” she explained, citing previous examples of postponed financial planning, particularly with regard to back pay and labour unions. Packirisamy further noted the Democratic Alliance’s (DA) potential resistance to the budget but issued a crucial caution, saying, “The DA can only reject this if they have an alternative proposal. And as we have discussed today, it is difficult to raise that amount of revenue elsewhere unless you actually cut back quite firmly on the expenditure side.”

Despite political disagreements, Sanisha remained hopeful about the broader financial direction. “Both sides of the GNU's major parties believe in fiscal restraint, in trying to achieve a primary surplus by the end of the medium-term framework. And that, in my opinion, is the good thing we ought to learn from this process,” Packirisamy concluded.

As the budget moves through the legislative process, Sithole underscored the difficulties of turning political will into tangible fiscal action. “There is indeed the political will that seems to have emerged, but I suspect that it has been forced. Do they have the political competence to get it all done?”

The success of the budget will depend on how well policymakers can oversee these challenging trade-offs given the state of the country’s economy. As the Pitso Webinar concluded, one thing that was clear: financial responsibility and policy negotiation will determine the country’s financial future in the months to come.

Budget seeks balance between fiscal sustainability and economic growth

BELINDA BANTHAM — Thu, 13 Mar 2025 08:13:59 +0000

Budget seeks balance between fiscal sustainability and economic growth BELINDA BANTHAM Thu, 03/13/2025 - 10:13

The revised Budget statement presented to Parliament by Finance Minister Enoch Godongwana on 12 March, proposing a new fiscal mix of spending, borrowing and taxing as a response to the previous opposition to the 2% rise in VAT proposed in the original Budget, diverges to some extent from the parameters outlined in the original Budget.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says there was also a welcome emphasis on factors such as avoiding more borrowing, empowering the South African Revenue Service (SARS) to strengthen tax compliance, and expediting infrastructural spending.

He says the amended Budget seeks to strike a new balance between fiscal sustainability and economic growth. “The promised comprehensive spending review is a step in the right direction, but realistic timelines need to be set. Tough decisions on recalibrating government spending were nonetheless still needed in the amended Budget.”

Prof Parsons points out that future risks to the fiscal outlook remain, which the World Bank has also again emphasised recently.

“It has been the repeated failure over several years to adequately control government expenditure that eventually led to ever bigger budget deficits and a persistent rise in the key debt-gross domestic product (GDP) ratio, which is now expected to peak this year at 76,2% of GDP. Hence, on the tax front, although the VAT rate now rises to only 16% over the next two years, that may not be the end of the story, unless more strenuous future efforts are made to rein in the spending side of the Budget.”

According to Prof Parsons, South Africa now risks drifting into a negative tax-and-spend fiscal cycle, with eventually damaging economic consequences unless higher growth generates more tax revenues. In an effort to enhance investment and growth, the emphasis in the Budget speech on increased collaboration with the private sector is nevertheless welcome.

“Whether the Budget has done enough to ignite economic growth to eventually reach the overall target of 3% GDP growth in the GNU’s recent Medium Term Development Plan (MTDP) is not obvious. Given a more vulnerable external environment, the Budget assumption of 1,8% economic growth this year may also be too optimistic. As the Budget speech also emphasised, higher economic growth and a durable recovery in economic activity require a stable macroeconomic environment, complemented by rapid implementation of economic reforms and improved state capacity.”

Prof Parsons says an extra layer of uncertainty has, however, now inevitably been injected into fiscal policy by the fact that the Budget in its present form still has to be eventually voted upon and passed by Parliament.

“There is likely to be a further robust debate around amending the money bills in Parliament. The Parliamentary process will be a challenging one to see whether parliamentarians can improve on the fiscal mix in the Budget, as well as consider input from other key stakeholders in the economy.”

NWU Business School launches PhD Hub for Africa

MARELIZE SANTANA — Tue, 11 Mar 2025 12:49:11 +0000

NWU Business School launches PhD Hub for Africa MARELIZE SANTANA Tue, 03/11/2025 - 14:49

The North-West University (NWU) Business School has established a formidable foundation and inaugurated the PhD Hub for Africa, a pioneering initiative aimed at nurturing doctoral talent and enhancing supervisory expertise throughout the continent. The PhD Hub was officially launched on Monday, 10 March 2025, during the International Conference on Green and Sustainable Development held at the Kigali Serena Hotel in Rwanda.

This strategic initiative, with a history of producing influential doctoral candidates, aligns with the vision of the NWU Business School, which is dedicated to Shaping Executive Minds in Africa. It underscores a firm commitment to impactful and transformative research. Recognising the increasing demand for high-quality doctoral education, the PhD Hub serves to bridge the gap between academia and industry by cultivating a new generation of thought leaders, innovators, and impactful researchers. The PhD Hub for Africa is aimed at industry professionals, emerging scholars seeking a PhD in Business Administration, and academic supervisors looking to enhance their doctoral mentorship expertise.

Prof Joseph Sekhampu, chief director of the NWU Business School, emphasised the Hub’s role in elevating the quality and impact of doctoral research. “This initiative is a bold step towards strengthening Africa’s research capabilities and shaping the future of business leadership on the continent. By creating a platform for rigorous scholarship and high-impact research, we are not only empowering doctoral candidates but also fostering sustainable solutions to Africa’s business and economic challenges.”

This initiative strengthens the NWU Business School’s strategic focus on internationalisation, forging collaborations with African and global academic institutions, and industry leaders to ensure that African business research remains relevant, globally competitive, and deeply rooted in the continent’s unique economic and social landscape.

The PhD Hub will catalyse impactful research, connecting scholars, business executives, and policymakers to drive transformational change across Africa. As part of this ambitious endeavour, the NWU Business School is engaging with continent-wide and international networks to provide PhD candidates with world-class mentorship, research resources, and exposure to global best practices.

This will ensure that doctoral research emerging from the PhD Hub is both academically rigorous and practically transformative in addressing Africa’s critical economic and managerial challenges. The NWU Business School invites potential PhD candidates, academic supervisors, and industry experts to become part of this transformative initiative. For more information on the PhD Hub for Africa, visit the NWU Business School’s website: www.nwubusinessschool.co.za.

The NWU Business School officially launched the PhD Hub for Africa - a pioneering initiative aimed at nurturing doctoral talent and enhancing supervisory expertise throughout the continent.

Mr Oscar Mosiane
Manager: Communication
Tell: 018 389 2144
Cell: 076 684 5014
Oscar.mosiane@nwu.ac.za

GNU Budget should support growth-enhancing measures

MOIRA MULLER — Wed, 05 Mar 2025 06:53:26 +0000

GNU Budget should support growth-enhancing measures

by Willie du Plessis

MOIRA MULLER Wed, 03/05/2025 - 08:53

The fourth quarter (4Q) gross domestic product (GDP) growth figures that were released on 4 March are positive, but the mild recovery in the GDP in the 4Q of 2024 again confirms that the Government of National Unity (GNU) is right to have set much higher inclusive growth and stronger job creation as South Africa’s key overarching economic priorities.

In commenting on the growth figures, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the latest data again emphasises that growth in South Africa has been too low for too long and that the situation must be remedied by maintaining the right economic environment for investment and growth.

“With the figures coming on the eve of the presentation of the postponed Budget, the modest 4Q 2024 GDP growth of 0,6% must therefore also inform the tough choices facing the GNU in finalising an amended Budget. The GNU’s Medium Term Development Strategy itself has set an overall growth target of 3%, which is about the minimum needed for South Africa to begin to make a big dent in its unemployment levels and help to alleviate poverty.”

Prof Parsons says the GNU Budget on 12 March must therefore show a policy mix that carefully calibrates fiscal consolidation, avoids a negative tax-and-spend fiscal cycle, and supports growth-enhancing measures.

“Accelerated growth-friendly structural reforms, especially in infrastructure development, need to be implemented urgently to lift South Africa’s medium-term growth to 3%, say by 2027.”

According to Prof Parsons, fixed-capital formation remains a weak link in South Africa’s slow and uneven economic recovery, as it is still only at about 15% of GDP instead of the NDP’s target of 25% to 30%.

“Household spending has done most of the heavy lifting in South Africa’s economic upturn so far. Higher sustainable growth also helps to create the economic buffers and resilience needed to mitigate any external shocks caused by elevated global uncertainty,” he concludes.