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/ INDUSTRY

The IMF emphasises that these reforms should tax revenue. The shortage before borrowings at the
all take place simultaneously. IMF studies end of March was R232 858 million, compared to
show that the simultaneous implementation of a budgeted R191 054 million.
these reforms can increase economic growth Unfortunately, government does not manage
significantly. its finances well. Recently, the auditor-general
released his 2018/2019 report for national
THE SOUTH AFRICAN SITUATION and provincial government and their entities. The
The South African economy experienced negative report pronounced the results as “disappointing”
growth of -0,6% in the third quarter of 2019 after and emphasised that executive authorities and
a surprising 3,2% growth in the second quarter oversight structures did not lead by example.
following the first quarter’s -3,1% growth. On an South Africa faces enormous problems. Slow
annual basis, the South African economy grew by economic growth, high government debt, massive
only 0,2% from the third quarter of 2018 to the unemployment, serious infrastructure problems –
third quarter of 2019. There are many reasons for especially at parastatal enterprises – together
this slow economic growth. In its September 2019 with huge corruption and unrest as people get
Quarterly Bulletin, the South African Reserve Bank disillusioned with failed service, all contribute to
quantified the negative effect of load shedding a negative perception of the future.
on gross domestic product (GDP) growth. GDP
is the monetary value of all finished goods and REQUIREMENTS FOR ECONOMIC
services made within a country during a specific RECOVERY
period. The continuing drought also resulted in • Domestic and international financial
negative growth in the agricultural sector. Further markets
disruptions to both mining and factory production Our domestic financial system is still operating
also played a role. well. The South African Reserve Bank and the
We continuously import more goods and JSE still perform their oversight role efficiently.
services than we export. In 2018 South Africans The independence of the Reserve Bank must
spent R172 962 million more on imports and be maintained. Unfortunately, in the auditing
payments to foreigners than we earned from profession there were several cases where a
exports and payments to us by foreigners. This lack of due diligence was clearly shown; the
so-called current account deficit must be balanced unfortunate KPMG case is an extreme example,
by an inflow of funds in the financial account. The but there are others. Recently, Tongaat-Hulett
inflow in the financial account consists of direct acknowledged misrepresentation of financial
investment, portfolio investment, and investments results. It will help if internal auditors are held
in bonds and financial derivatives. to the same standards as external auditors. The
While foreign direct investment balances the external financial market is fully deregulated, and
country’s “overdraft”, the income from foreign the South African currency, shares and bonds are
investment increases the outflow on the current freely traded. This is a big positive element.
account. Instead of improving our bottom line, Government is forging ahead with its plan
it increases the shortage on the current account. to change the Constitution to allow for land
In recent years, the ownership of many South expropriation without compensation. If it succeeds
African companies has changed and foreigners in changing the constitution, it will have a serious
now own a large share of the listed companies on impact on financial markets. Foreign investors will
the Johannesburg Stock Exchange (JSE). take the uncertainty about property ownership
While we, the man on the street, still manage to into account when deciding whether to invest in
balance the country’s accounts, the same is not true South Africa or not.
for government. While government expenditure
increases, government income is under pressure. • Trade
Government budgeted for a total revenue of Government’s role is to facilitate trade and
R1 321 146 million in the 2018/2019 budget. not hinder it. Agricultural exports are subject
Actual revenue fell short of this target by R49 914 to various phyto-sanitary and other non-tariff
million, mainly because of R57 268 million lower barriers. Importing countries demand government

Volume 22 No 1 February 2020 | 13