South Africa's economic policies
The South African government is committed to providing facilities and opportunities to communities disadvantaged by the pre-1994 apartheid system, and to enabling those communities to share equitably in the resources of the country and its economy.
The government's macro-economic Growth, Employment and Redistribution (Gear) strategy is, at the same time, based on promotion of the free market and financial and fiscal discipline, aiming at economic growth, job creation and provision of basic services to all South Africans.
The government has underlined the importance it attaches to investment by introducing measures to enhance and support trade and industrial development.
The government is also promoting the development of small businesses. The National Small Business Act provides a mechanism to review the impact of proposed legislation on small businesses. It is also the enabling legislation for the Ntsika Enterprise Promotion Agency and National Small Business Council.
The National Economic Development and Labour Council (Nedlac) facilitates discussions to reach consensus between government, business and organised labour on issues affecting the economy.
Business organisations such as the Chamber of Mines, the SA Chamber of Business, the South African Foundation, and foreign chambers of commerce in South Africa regularly liase with government and comment on draft legislation.
Key reforms
The government is committed to sound public finances. Key reforms since 1994 include:
- The introduction of a three-year medium-term expenditure framework (MTEF).
- The establishment of co-operative inter-governmental institutions to manage budgetary and financial coordination between the national, provincial and local government.
- The creation of the South African Revenue Service as an autonomous and strengthened tax administrator.
- The adoption of a framework agreement to restructure state assets.
- The introduction of auction marketing arrangements as part of improved debt management.
- The enactment of the Public Finance Management Act of 1999
Fiscal policies aimed at attracting foreign investment include:
- Reducing the budget deficit
- Easing the debt burden
- Improving tax collection
- Privatising state assets
- Eliminating government dis-saving
- Increasing government investment on infrastructure
- Reducing household and corporate taxes
- Reducing government expenditure as a percentage of GDP
South Africa has achieved a level of macroeconomic stability not seen in the country for 40 years.
The budget deficit came down from 9.5% of gross domestic product (GDP) in 1993 to fractionally over 1% in 2002/03. Total public sector debt fell from over 60% of GDP in 1994 to barely over 50% of GDP in 2002/03.
The net open forward position of the Reserve Bank fell from US$25-billion in 1994 to zero in 2003, while foreign reserves rose from one month's to two-and-a-half month's import cover in the same period.
These advances are creating opportunities for real increases in expenditure on social services, reducing costs and risks for investors and thus laying the foundation for increased investment and growth.
