South Africa in danger of missing 2017 growth target: Gigaba

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South Africa's Finance Minister Malusi Gigaba speaks at the World Economic Forum on Africa 2017 meeting in Durban, South Africa, May 4, 2017. REUTERS/Rogan Ward

JOHANNESBURG (Reuters) – South Africa is in danger of missing its 1.3-percent growth target in 2017 due to poor performance of major sectors of the economy that will likely restrain tax revenues, Finance Minister Malusi Gigaba said on Monday.

Africa’s most industrialised economy aims to collect just under 1.3 trillion rand ($98 billion) in taxes during the 2017/18 fiscal year that ends in March, versus the 1.14 trillion rand a year earlier.

“Our current level of growth is simply insufficient and not enough … We cannot be complacent about the 2.5 percent second quarter growth that got us out of technical recession,” Gigaba told a tax conference.

That 2.5-percent expansion in the three months to the end of June followed contractions of 0.6 percent in the first quarter and 0.3 percent in the final quarter of 2016.

With growth and revenues expected to underperform and analysts predicting a budget shortfall of as much as 50 billion rand, the deficit is unlikely to come down, raising the risk of credit downgrades deeper into junk territory.

Tax Commissioner Tom Moyane, speaking at the same event, also warned that the revenue service collection target would be difficult to achieve in current conditions.

“The 2.5-percent growth does not provide us with a glimmer of hope … the 1.265-trillion target for this year will be a stretch. It will be difficult in these sluggish economic conditions,” Moyane said.

In February former Finance Minister Pravin Gordhan announced increases in taxes for top income brackets in a bid to reduce the budget deficit to 2.6 percent of national output by 2019/20 from the current 3.4 percent.

All three major ratings firms cut the country’s credit after President Jacob Zuma fired Gordhan as finance boss in March, and have warned that a combination of policy and political uncertainty and low growth could trigger further cuts. [nL8N1LO4YZ]

Reporting by Mfuneko Toyana; Editing by James Macharia and Andrew Heavens

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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