NWU Business School

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.

Postponement of Budget will have unintended consequences

BELINDA BANTHAM — Thu, 20 Feb 2025 10:30:38 +0000

Postponement of Budget will have unintended consequences BELINDA BANTHAM Thu, 02/20/2025 - 12:30

The unprecedented decision by the Government of National Unity (GNU) Cabinet to postpone the Budget until 12 March because of disagreement over tax increases will inevitably have unintended consequences for South Africa’s political economy.

Prof Raymond Parsons, economist from the NWU Business School, says if the eventual Budget in March turns out to be truly committed to growth and job creation (as was outlined in the recent GNU Medium Term Development Plan) the delay would have been worthwhile if the GNU gets agreed trade-offs and better outcomes for the economy as a whole.

“Fundamentally, the sharp controversy about the tax burden can basically be seen as symptomatic of the fact that economic growth in South Africa has been too low for too long. The tax base as a whole has shrunk as a result, given persistently low growth, thus limiting financing options.”

He says the postponed Budget will nonetheless create an elevated level of policy uncertainty for now, which has already been reflected in the rand.

“Markets will be carefully monitoring the progress being made by the GNU from now on in finding sufficient consensus about the final Budget. It also comes at a time globally when risks to South Africa are also higher.”

However, according to Prof Parsons, the fiscal situation has not been left open-ended, and the amended Budget is to be presented on 12 March.

“In the interim, National Treasury communication strategies will need to be adapted to the new circumstances. Between now and 12 March there should be an informed and reasonable debate about what fiscal options are indeed available to South Africa to strike the right balance between spending, borrowing and taxing in ways that promote policy certainty and job-rich growth.”

South Africa needs to respond urgently and make the economy as “Trump-proof” as possible

BELINDA BANTHAM — Tue, 11 Feb 2025 06:34:06 +0000

South Africa needs to respond urgently and make the economy as “Trump-proof” as possible BELINDA BANTHAM Tue, 02/11/2025 - 08:34

“We should not underestimate what may ultimately be at stake for the South African economy and business in the face of the current sharp breach in bilateral political and diplomatic relationships between the United States (US) and South Africa.”

In commenting about the latest tensions in the US-South Africa political and economic relationships, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says disinformation about the situation in South Africa and negative US statements about the country’s policies have triggered a worrying spike in economic uncertainty, which is not only bad for business but also for the country more broadly.

“Apart from the growing concerns about the future of the African Growth and Opportunity Act (AGOA) and its economic significance to South Africa, a serious break in economic relationships with a major trading partner like the US could have other collateral consequences for South Africa – particularly its quest to generate higher investment and job-rich growth.”

Prof Parsons points out that, as President Cyril Ramaphosa reiterated in his SONA last week, the top priority for South Africa is higher inclusive growth and job creation. This is now the overall thrust of the Medium Term Development Plan of the GNU. As a small open economy that is at present aiming for a much higher gross domestic product (GDP) growth rate of 3% in the medium term, South Africa therefore needs to play its cards well and smartly.

“To minimise the possible impact of external shocks, South Africa needs to respond urgently to the latest threats from the Trump administration and make the economy as ‘Trump-proof’ as possible.”

According to Prof Parsons, it is therefore necessary to do battle with disinformation about South Africa at several levels.

In addition to the various political and diplomatic initiatives that are now under way, the business sector has a crucial role to play in the escalating saga.

Affected companies in both the US and South Africa need to enlarge their spheres of influence in the face of these challenging developments.

“Chambers of commerce in South Africa and the US are already intervening. However, in the period ahead, affected business firms also need to take positive steps to reinforce South Africa’s longstanding economic engagement with the US.”

Prof Parsons says companies have suppliers and customers to mobilise for support. Business needs to apply skilful and coordinated messaging that continues to advance South Africa’s national economic and strategic interests.

“Indeed, business needs to be more united than ever in presenting its case to the Trump administration and other stakeholders. Intervention by business should be conducted in a calm and focused manner, though, proposing better ways – supported by facts – to manage and preserve US–South Africa economic relations in the short and longer terms.”

Business School’s Pitso discussion analyses SONA 2025

BELINDA BANTHAM — Mon, 10 Feb 2025 07:47:59 +0000

Business School’s Pitso discussion analyses SONA 2025

by Bertie Jacobs

BELINDA BANTHAM Mon, 02/10/2025 - 09:47

“We won’t be bullied.” These words by President Cyril Ramaphosa during his State of the Nation Address (SONA) in response to US president Donald Trump’s verbal attacks on South Africa grabbed headlines, but SONA 2025 had much more to unpack than that.

On Friday, 7 February, the North-West University (NWU) Business School hosted its Pitso discussion analysing SONA 2025 under the theme of: In pursuit of “sufficient consensus”: SONA 2025.

The discussion examined whether President Ramaphosa’s speech reflected the principles of “sufficient consensus” and what this means for the future of South Africa’s Government of National Unity (GNU).

Columnist and analyst Khaya Sithole served as moderator, while the panel of experts consisted of Duma Gqubule, columnist and founder of the Centre for Economic Development and Transformation, Dr Ntsikelelo Benjamin Breakfast, the acting director of the Centre for Security, Peace and Conflict Resolution at the NWU, and Samkele Thabani Maseko, who is a political reporter at the SABC.

The trio, with Sithole organising proceedings, critically evaluated the policy priorities outlined in SONA 2025 and their potential to strengthen unity or heighten divisions within the coalition government. Other points of discussion included the durability of the GNU, indicators with reference to the budget and economic growth expectations.

Both Dr Breakfast and Sithole agreed in their assessment of SONA 2025 that it felt like an ANC-centric speech and not one reflective of the GNU. Gqubule delivered a scathing criticism of President Ramaphosa’s approach to unemployment and growth, calling him the worst president since 1994. “I wanted to cry listening to that speech,” he said of President Ramaphosa’s tenth SONA. Maseko also noted the number of pipe-dream projects that have been hallmarks of President Ramaphosa’s previous SONAs. In this case, all agreed that the projected 3% GDP growth is unattainable.

Another major point of discussion was US-South Africa relations in the aftermath of recent remarks by President Trump and some of his allies.

Each panellist gave President Ramaphosa’s speech a score out of 10, with Maseko giving it an overall 7, Dr Breakfast gave it an overall 5, while Gqubule focused on the economic aspects of SONA 2025, and gave that area a 3.

Achievement of SONA targets will depend on faster implementation of growth-friendly policies

BELINDA BANTHAM — Fri, 07 Feb 2025 07:36:04 +0000

Achievement of SONA targets will depend on faster implementation of growth-friendly policies BELINDA BANTHAM Fri, 02/07/2025 - 09:36

President Cyril Ramaphosa’s wide-ranging State of the Nation Address (SONA) agenda that confirms the tangible commitment of the Government of National Unity (GNU) to faster and higher job-rich growth is positive.

In commenting on the SONA, which was delivered on 7 February, Prof Raymond Parsons, economist of the NWU Business School, says the South African economy is indeed eventually capable of even much higher economic growth than 3% if the right choices are made.

“The present slow and uneven economic recovery nonetheless illustrates the extent to which accelerated structural reforms are urgently needed if South Africa is to even reach a 3% gross domestic product (GDP) growth by 2027.”

Prof Parsons says achieving the socioeconomic targets outlined in the SONA will therefore depend heavily on the accelerated implementation of growth-friendly policies and projects, better governance and less corruption at various levels, and ensuring that the country’s vulnerable public finances are properly stabilised.

“The SONA recognises that it will indeed also be essential to harness the participation of the business sector on an even bigger scale to reach much higher job-rich growth. Stricter timelines would be helpful to expedite the delivery of the much higher infrastructural spending emphasised in the SONA.”

Prof Parsons says on the global front, the SONA recognises the extent to which 2025 is going to be a roller-coaster year of change for many economies, including South Africa. As a small open economy, South Africa needs to play its cards smartly and, in particular, make its economy as “Trump-proof” as possible.

“South Africa’s economy needs to remain globally competitive in order to deal with both the risks and opportunities of a shifting geopolitical scenario. The SONA emphasises the extent to which South Africa’s hosting of the G20 this year is a big opportunity to ‘showcase’ the South African economy.”

Prof Parsons explains that the SONA thus seeks to advance the progress made by the Government of National Unity (GNU) to date.

“The overall challenge for GNU policy is now to build on the existing better short-term business confidence and convert it into long-term investor confidence. It is elevated investment that enables more growth. A clear and predictable policy environment and a high degree of policy certainty from now on will encourage business to take a long-term perspective on growth and development in South Africa,” he concludes.

Electricity tariff increase will inevitably cause the cost of doing business to rise

BELINDA BANTHAM — Fri, 31 Jan 2025 10:19:51 +0000

Electricity tariff increase will inevitably cause the cost of doing business to rise BELINDA BANTHAM Fri, 01/31/2025 - 12:19

Although it is still painful for business and consumers, the decision by the National Energy Regulator of South Africa (Nersa) to allow a much lower increase of 12,7% in Eskom tariffs, instead of the 36% previously sought by Eskom, is a significant outcome.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says Nersa has acknowledged the critical inputs it received last year from extensive public hearings on Eskom’s original massive application and its potential socio-economic impact.

“The usual cost-plus approach to Eskom finances has therefore now been considerably ameliorated. However, even with a 12,7% Eskom tariff hike, allowance must be made for the additional municipal surcharges that usually follow such tariff rises. Hence the electricity costs of doing business will inevitably rise later this year.”

According to Prof Parsons, higher power tariffs will nonetheless also encourage the search for alternative energy options and further reduce dependence on Eskom. “The Nersa decision does not resolve the much bigger challenge of how Eskom is to be properly financed in the longer term – and how soon its present restructuring will facilitate more viable outcomes for the troubled state-owned enterprise.”