2020/2021 KZN budget speech tabled by MEC Ravi Pillay during a sitting of the KZN Provincial Legislature
Honourable Speaker
Honourable Premier
Deputy Minister of Finance
Honourable Members
Heads of Departments
Chief Financial Officers
Head of Provincial Treasury and Officials Present
Business, Academic, Religious and Community Leaders, Traditional Leadership
Members of the media
Ladies and gentlemen
1. Introduction
Ben Okri, the acclaimed Nigerian poet reminds us that: “For we are all richly linked in hope,
Woven in history, like a mountain rope.
Together we can ascend to a new height, Guided by our heart’s clearest light.
When perceptions are changed there’s much to gain, A flowering of truth instead of pain.
There’s more to a people than their poverty; There’s their work, wisdom, and creativity.”
We are acutely aware of the poverty of too many of our people. In fact, it is calculated that one-third of our people rely on our social security net – on old age grants, on disability grants, on child-support grants. We have consciously put in place this social security net, because we are a government that cares – a government for the poor – a disciplined force of the left.
But, like Ben Okri says, we understand that this is not enough – this is not sustainable without our work, wisdom and creativity. And I accordingly make the call that in this historic year of 2020, let us, the people of KwaZulu-Natal, be defined by our work, our wisdom and our creativity. As former President Mandela said:
“Our democratic gains will be shallow and persistently threatened if they do not find expression in food and shelter, in well-paying jobs, and rising living standards”.
President Cyril Ramaphosa, in his 2020 State of the Nation Address, inspired by our powerful record, said:
“Our history tells us that when we are united in peace and faith, we can conquer all obstacles and turn our country into a place in which we all feel safe and comfortable. It is in that spirit that we now approach the present moment.”
President Ramaphosa goes on to say:
“The greatest strength of our constitutional democracy, and the reason it has endured, is because we have been able to forge broad-based coalitions and social compacts, be they with business, labour, special interest groups or wider civil society.
Achieving consensus and building social compacts is not a demonstration of weakness. It is the very essence of who we are.”
It is a choice we consciously make. We can choose to prioritize our generally narrow sectarian needs, or we can choose to genuinely work together for the collective good.
Having considered all our considerable challenges, acknowledged our mistakes and reaffirmed commitment to our basic ethical value system, President Ramaphosa directs us as follows:
“This year, we fix the fundamentals, we pursue critical areas of growth and we ensure excellence in planning and execution in government.”
1.1. Global Economic Outlook
Global economic activity decelerated significantly last year, with continued weakness in global trade and investment, high debt and deteriorating credit quality. Despite the signing of phase one of a trade agreement between China and the United States of America (US) earlier this year, the continued trade war, and the overall slowdown in the Chinese economy remain a threat to the global outlook.
The situation is further exacerbated by the coronavirus outbreak that has the potential to further impede the world economy. China and the US are two of South Africa’s major trading partners. The economic challenges of China and the US have a direct bearing on the economic prospects of South Africa.
1.2 South African Outlook
Notwithstanding the moderate rebound in the second quarter of last year, economic growth in South Africa is estimated to have remained subdued at an average of 0.4% in 2019 and is expected to grow at about 1% this year and in
2022. As correctly pointed out by the South African Reserve Bank, IMF and the World Bank less than two months ago, a multitude of challenges constrain the country’s economic outlook. These challenges include, among others, subdued business confidence, infrastructure bottlenecks especially in electricity supply and weakening external demand, particularly from the Euro Area and China.
These issues were further echoed by the honourable President Cyril Ramaphosa, in his State of the Nation Address last month. The President was bold and frank about the financial stress on the public energy utility, the deteriorating government budget balance and increased debt sustainability concerns and debt-service costs.
The economic woes of the country are further reflected in StatsSA’s data released last month showing that the total number of liquidations increased to 2 042 in
2019 compared to 1 845 in 2018. Further, government revenue in the form of taxes is negatively affected (R12 billion projected shortfall) and thus hinders service delivery and the National Development Plan’s vision 2030 of increasing inclusive economic growth to above 5%.
To do this (achieve the NDP: Vision 2030), we need to remind ourselves, as Finance Minister Tito Mboweni, said in his Budget Speech:
“Our economy has won before, and it will win again.
Before democracy our growth was pedestrian. Indeed, between 1990 and 1992, the economy contracted for three years in a row.
In the fifteen years following democracy, economic growth averaged 3.6% a year. The gross debt-to-GDP ratio declined from 46% to 26%.
In the five years from 2003 to 2008, growth averaged around 5%, and South Africa was amongst the fastest-growing major economies. The unemployment rate improved by 5 percentage points.
Now, even after a decade of weak economic performance, South Africa still boasts deep and liquid capital markets, strong institutions, the most diversified economy on the continent, and a young population.
Winning requires hard work, focus, time, patience and resilience.
Achieving economic growth and higher employment levels requires a plan.”
I believe that the 2020 State of the Nation Address and Budget Speech sets out that plan from a national perspective. Our task is to support, where necessary customise, and implement the plan for us in KwaZulu-Natal.
1.3 Economic activity in KwaZulu-Natal
The real economic activity in KwaZulu-Natal also shows a downward trajectory. In 2018, KwaZulu-Natal generated a regional real gross domestic product (GDP) amounting to R505.6 billion, which was equivalent to a 0.7% growth rate. The provincial economic growth is estimated to have contracted by 0.4% last year and is projected to record growth of only 0.4% this year, before expanding to 1.3% in 2021.
This lethargic economic performance contributes to the overwhelming low employment rate in the province, as the economy is unable to create employment opportunities to meet the growing labour force, especially for new entrants. This represents our central challenge.
The latest data by StatsSA released last month shows that the current expanded unemployment rate in KwaZulu-Natal is high at 41.9% compared to the national average of 38.7%. This high unemployment rate is the main socio-economic challenge that contributes to high levels of poverty and inequality, thereby impacting on the overall quality of life of the people of the province.
High unemployment is particularly rife among the youth. In 2018, young people aged between 25 and 34 years, experienced a high expanded average unemployment rate of 49.5%.
Despite these challenges, we continue to have some key drivers in the provincial economy, namely, Finance at an expected GDP contribution of 17.5% this year, followed by Manufacturing at 15.9% and Trade at 14.3%. Tourism is also pivotal to economic performance in the province. In 2018, the number of people directly employed in the travel and tourism sector in KwaZulu-Natal was approximately 62 649, while the industry’s total contribution to employment within the province was estimated at 124 027.
Over the same period, tourism’s direct contribution to GDP in KwaZulu-Natal was around R10.7 billion. Read more
