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NEWS
Henley offers scholarships to investigative journalists
Henley offers scholarships to investigative journalists

5 trends that can keep the South African MBA relevant
5 trends that can keep the South African MBA relevant

We need to realign government, business and civil society
We need to realign government, business and civil society

Life as a full-time MBA student
Life as a full-time MBA student

Brexit delay provides breathing space for SA
Brexit delay provides breathing space for SA

MSA joins the ADvTECH family
MSA joins the ADvTECH family

SA plunges to 117 out of 149 in gender wage equality
SA plunges to 117 out of 149 in gender wage equality

UCT’s Executive MBA recognised for its distinctive approach
UCT’s Executive MBA recognised for its distinctive approach

GIBS Executive MBA programme debuts in top 50
GIBS Executive MBA programme debuts in top 50

Can Africa fill the glass?
Can Africa fill the glass?

YALI AFRICA launch at Unisa
YALI AFRICA launch at Unisa

The fake resurrection of South Africa
The fake resurrection of South Africa

Don't panic: The digital revolution isn’t that unusual
Don't panic: The digital revolution isn’t that unusual

Why Agile works
Why Agile works

How firms can avoid the mediocrity trap
How firms can avoid the mediocrity trap

How a 100000-strong company is relearning how to innovate
How a 100000-strong company is relearning how to innovate

The changing shape of the MBA
The changing shape of the MBA

Adding climate change to curriculum is a top priority
Adding climate change to curriculum is a top priority

The MBA should turn you into a business disruptor
The MBA should turn you into a business disruptor

Innovation in SA organisations driven by C-level support
Innovation in SA organisations driven by C-level support

UNISA SBL a torch-bearer of training for military veterans
UNISA SBL a torch-bearer of training for military veterans

Scaling up the MBA for relevance in the 4IR
Scaling up the MBA for relevance in the 4IR

Moody's: SA not out of the woods yet
Moody's: SA not out of the woods yet

GIBS manufacturing-focused MBA kicks off in Durban
GIBS manufacturing-focused MBA kicks off in Durban

Henley’s Makhoalibe selected for sought-after programme
Henley’s Makhoalibe selected for sought-after programme

Personal potential, a source of power
Personal potential, a source of power

Reach your business leadership potential with a MBA from WBS
Reach your business leadership potential with a MBA from WBS

MPC: SA needs a period of stable interest rates
MPC: SA needs a period of stable interest rates

SA’s energy problems just the tip of the iceberg
SA’s energy problems just the tip of the iceberg

What's really driving disruption?
What's really driving disruption?

Why has there been such a failure of leadership?
Why has there been such a failure of leadership?

Steinhoff: Exactly where does responsibility stop and start?
Steinhoff: Exactly where does responsibility stop and start?

The cure for the loneliness of command
The cure for the loneliness of command

How to survive in the age of digital transformation
How to survive in the age of digital transformation

New MBA timetable starts in 2016
New MBA timetable starts in 2016

EVENTS
Henley MBA & PGDIP Preview Day
Henley MBA & PGDIP Preview Day
29 May 2019,
Pretoria

UCT GSB MBA Information Sessions
UCT GSB MBA Information Sessions
15 October 2019,
Johannesburg



06 NOVEMBER 2018
Mini-budget - the implications for business

by Binganidzo Muchara: Senior Lecturer in the Finance and Economics department at Unisa’s Graduate School of Business Leadership (SBL).
The mid-term budget policy statement was presented by new finance minister, Tito Mboweni, in October. While the speech again acknowledged the issues – including corruption, inflated public sector wage bills and the VAT backlog – clear implementation plans to address these issues, remain to be seen. With the new minister certainly in a tight spot with little room to change existing plans for 2018, the main objective appeared to be to restore trust through tabling an honest rhetoric. The financial picture is certainly worse than anticipated, with the expected growth rate of only 0.7% - even weaker than some local economists’ forecasts. Weak economic growth and the unexpected issue of unpaid VAT refunds have increased the budget deficit.

This will not go down well with the ratings agencies, and Mboweni says “honest conversations” will be heard with them. There is hope that they will see this as a once off impact, rather than a continuing trend. The rand has continued to slump following the budget. Beyond the broader economic picture and immediate shock, there are key aspects that have particular relevance to job creation and doing business in South Africa. Central to the statement was President Cyril Ramaphosa’s economic stimulus and recovery plan. The recovery plan is a critical indicator not only of strategies to be implemented in this financial year but also of the direction that Budget 2019 will take next year in its efforts to move South Africa out of recession towards economic growth.

Mboweni’s speech essentially attached numbers to the growth stimulus plan. On the positive side, at least there is a unified message with the President and Finance Minister acknowledging the issues and dedicated to a consistent approach. Overall, government is embarking on large scale reforms in electricity, telecommunications, transport and logistics, which should have a long-term positive impact on business. Administered prices in key sectors such as energy and fuel are being reviewed. In addition, carbon tax implementation has been postponed by 6 months to June 1, 2019. A tax of R120 per ton of carbon dioxide is expected to be levied, which will place a high cost burden on companies like Sasol.

R20 billion of the R27 billion adjustment as a result of VAT refunds is certainly a large hit that the market hadn’t anticipated. While VAT was hiked to 15% this year, the state will now earn 20% less than it expected from VAT due to the refund payment. However, acknowledging the problem with VAT refunds and SARS committing to repayment within the prescribed 21 days can be seen as positive news for business. The backlog will now be settled in a once-off payment.

The “reconfiguration of state-owned enterprises”, which takes the bulk of the budget, was a critical focus. Government guarantees to state enterprises are at more than R450 billion, according to data from the National Treasury, with increasing exposure for the state growing from 54.4% in the past fiscal year to 64.5% this year as companies have drawn on the guarantees. Eskom alone has a debt burden of R399 billion. This exposure is not sustainable nor healthy for the government. The matrix of the reconfiguration becomes very important.

Privatisation may not be a desirable option for such a strategic sector, thus, the focus of the reconfiguration should be on improving business processes, rooting out unethical practices and revisiting the funding model of these parastatals. Parastatals may be closed or private equity partners may be invited to buy into parastatals, including SAA, which received a R5 billion lifeline to prevent a repay debt. R1.249 billion will go to the struggling South African Airways Express, which was grounded in May 2018.

Mboweni further emphasised the necessity to restructure the Energy sector – which must be viewed as more than just Eskom. Mboweni said that a new electricity grid could be created harnessing power from independent power producers. This is critical in sustaining employment by small companies. It is estimated that these producers will create over 61 000 jobs.

Over the next three years, public infrastructure expenditure is estimated to be R855.2 billion, of which state-owned companies account for R370.2 billion. An additional aspect of the recovery plan is the establishment of the South African Infrastructure Fund which will reprioritise infrastructure spending as crucial to economic activity. The contribution from the fiscus towards the Infrastructure Fund over the medium-term expenditure framework period will be in excess of R400bn, which will then be used to leverage additional resources from developmental finance institutions, multilateral development banks, and private lenders and investors. As part of establishing a new Infrastructure Fund, government is planning “innovative financing mechanisms”- including subsidies to make participation more attractive for companies. If a project is commercially sustainable, government will remove regulatory impediments that stand in the way of investment, especially in housing, telecommunication and transport projects including airports.

This focus on infrastructure development is good news for business. While the immediate financial picture is dire, the rallying cry for the private sector to understand the economic stimulus and growth plan and take a long-term view continues. I believe the private sector can bank on the plans for the Investment Summit, bank on the initiatives emerging from the Job Summit and bank on more infrastructure investment that will result in employment creation for the youth and economic growth.
Source:

University of South Africa Graduate School of Business Leadership
The UNISA Graduate School of Business Leadership (SBL) helps organisations meet today’s challenges. Through a range of management development programmes, we transform your human resources potential into an organisational success factor. Visit our InfoCentre or website.

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