CEO of Business Leadership South Africa, Busi Mavuso, expressed disappointment over job losses, highlighting the loss of 66,000 jobs in Gauteng and 2,000 in KwaZulu-Natal—two key economic growth drivers.
For those living in the Gauteng, considered the economic powerhouse of the country, this outcome is understandable, according to Mavuso.
“The quality of services continues to deteriorate amid political dysfunction in the metros, and uncertainty around the provincial government’s ability to rein metros in and restore service delivery,” Mavuso said.
According to Mavuso, it was also good to see the slight decrease in unemployment in the third quarter announced last week, with 294,000 new jobs helping to reduce the unemployment rate by over a percentage point to 32.1%.
The CEO said that the dip in unemployment is an early reflection of the positive response to the Government of National Unity (GNU). In addition to that, it has created confidence for businesses to ahead and invest in expansion.
“A more stable electricity supply has also helped, with the trade and construction sectors particularly strong in adding jobs,” Mavuso said.
“The improvement in construction, which added 176,000 jobs, reflects momentum finally on infrastructure investment, suggesting that an improvement in economic capacity and growth is under way.”
S&P Global upgrade
“The upgrade of South Africa by S&P Global to a positive ratings outlook is, I hope, the first of many steps toward regaining our investment grade credit rating that we lost at the beginning of the Covid crisis,” Mavuso said.
Mavuso said that the upgrade by S&P Global is a testament to the success of the SA government in regaining control over its finances during the last few years.
The primary budget surplus that was achieved by government in the last financial year was an important benchmark, highlighting that government was spending less than it was getting from taxes and other revenue (excluding debt service costs), for the first time in many years.
While the medium-term budget policy statement (MTBPS) revealed that certain revenue targets for this year will be missed, it still painted a picture of a government that is in control, according to Mavuso.
The CEO said: “The state-owned enterprises are no longer the bottomless pits of taxpayer money they once were, and some moderation has been delivered in core government spending.”
“My congratulations to National Treasury particularly, but also to the rest of government that has had to tighten its belts to deliver this outcome.”
While a ratings improvement may seem intangible to the average South African it does make a material difference.
According to Mavuso, since the 2024 elections, yields on key government bonds have improved by about two percentage points. This translates to around 20% less in interest government has to pay when issuing new bonds.
“That is a material improvement in the cost of debt. That not only means that less of government’s money goes into debt service costs, but it also lowers the cost of capital for the whole of the economy,” Mavuso said.
Mavuso said that businesses must function within the sovereign ceiling which means that SA banks and other large companies who issue bonds, can only do so at some margin above the government yield.
The CEO said: “With improvements in the sovereign yield, other businesses also see an improvement in the cost of debt, which makes it cheaper to invest and grow the economy.”
IOL Business