Keynote address by Deputy Minister of Finance, Dr David Masondo, at the Moneyweb Economy and Investing Summit
The Deputy Minister of Finance, Dr David Masondo, addressed the Moneyweb Economy and Investing Summit with a clear message: government is committed to growing the economy and tackling the structural challenges that constrain growth, investment and employment in South Africa.
Is government serious about growing the economy?
There is no doubt that promotion of a higher rate of economic growth is one of the most important challenges facing South Africa. Historical growth rates have been subdued, particularly over the past decade or so, and have been insufficient to offset population increases, leading to declining GDP per capita and rising unemployment, poverty and inequality.
Moreover, subdued economic growth is generating further weaknesses in other macroeconomic fundamentals, including high levels of public debt, declining foreign investments.
The question before us is whether government is serious about economic growth?
My answer is the South African government is serious about growing the economy.
Since the 6th administration under President Ramaphosa, our overarching mission has been to reduce the cost of doing of doing business in South Africa as a necessary condition for economic growth and reducing the cost of living.
The cost of doing business and living shows up in high prices that businesses and South Africans must pay for goods and services.
- It is when the cost of capital is high that the cost of borrowing is high, not only for government and households, but businesses.
- It is when price of energy, freight logistics and data, amongst others increase the cost of production.
- It is when there is crime and corruption that the cost of doing business is high.
Recently, the geopolitical tensions have noticeably generated, amongst others, a complex and uncertain trading environment which is also likely to have adverse impact on economic growth.
It is for this reason, that whilst we continue to negotiate a better trade deal with the USA, we are also seeking to increase the diversification of trade partners exemplified by the recent trade agreement with China on stone fruit.
Macro-economic stability
Evidence suggests that, though not sufficient, a stable macroeconomic framework is a necessary condition for sustainable economic growth. Amongst others, macro stability requires sustainable public debt and stable and low inflation.
- Price stability or stable inflation is one of the fundamental macro-economic objectives of government, given its impact on the purchasing power of the domestic currency, economic risks and the nominal cost of capital.
- To place our economic on a sustainable footing, government continues to pursue economic and fiscal reforms such debt sustainability. Sustainable sovereign debt enhances our credit profile, reduces the cost of borrowing in the form of the bond yield.
- It is our belief that relatively lower cost of borrowing or bond yields will boost investor confidence in both our sovereign and corporate bond markets.
To lower the cost of both debt and equity, we undertaken the following measures:
- Firstly, over the last three years we have maintained a primary budget surplus – revenue exceeds non-interest spending.
- Reducing debt and debt service costs is critical for achieving a stable macroeconomic framework. Higher debt levels cast doubt on debt sustainability and that increases the country cost of borrowing as lenders demand a premium to mitigate risk of default.
- As debt-service costs decline, some of the savings may be used to build fiscal buffers and to invest in productive infrastructure.
We have pursued price stability through the Inflation Targeting (IT) Regime of which the mandate is to guarantee not just stability but also low inflation.
When prices are low and stable so would be interest rates. For consumers, low inflation and interest rates imply lower cost of living. While for producers, it implies low cost of doing business.
- However, high inflation increases production costs/ the cost of doing business as workers demand more wages to compensate for erosion of purchasing power.
- High inflation also reduces international competitiveness, and consumer demand, leading to decline in firms’ profitability.
We are reviewing the current IT regime. Technical work by the SARB and National Treasury found the current 3–6% inflation range too wide. Original plans in 2002 intended to narrow it to 3–5%, but shocks delayed this.
Operation Vulindlela and cost of doing business
To accelerate economic growth, we have also been undertaking structural reforms through Operation Vulindlela to make the South African economy competitive by reducing the cost of doing business in South Africa.
- We have been working hard to reduce the cost of energy, telecommunication, and freight logistics and make it easy to source skilled labour all over the work through VISA reforms.
- In its first phase, the Operation Vulindlela reform programme focused on five areas which were identified as the most important constraints on economic growth: energy, logistics, water, telecommunications, and the visa system.
Highlights:
- Energy: debt relief to Eskom, private generation investment, competitive electricity market and establishment of NTCSA.
- Logistics: freight rail open access, private sector participation in port and rail infrastructure.
- Water: establishment of National Water Resources Infrastructure Agency, Water Partnerships Office, regional utilities.
- Telecommunication: lowering data costs.
- Visa: points-based system, Trusted Employer Scheme.
Infrastructure
Provision of infrastructure is critical for economic growth. It does not only contribute to fixed capital formation, but it reduces the cost of production and doing business and cost of living.
- Government will spend more than R1 trillion over the next three years on public infrastructure focusing on roads, energy, water and sanitation.
- Private sector participation is being encouraged through Credit Guarantee Vehicle (CGV), PPP regulation reforms and blended finance models.
Crime and greylisting
- Crime increases costs for businesses and households — reducing crime lowers these hidden costs.
- FATF greylisting in 2023 hurt investment confidence. Government has substantially completed all 22 action items for removal.
- The FATF Plenary in October 2025 may delist South Africa, pending outcomes of the July 2025 onsite assessment.
Next steps and mutual evaluation
- Even if South Africa exits the greylist in October 2025, reforms must continue.
- The 2026/27 Mutual Evaluation will focus on effectiveness of implementation, not just laws.
Conclusion
We are looking forward to working together – business and labour to grow the South Arican economy.
I wish you well in your deliberation.
Thank you
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