Consumption-led growth has stalled

The government is looking to the transport and energy sectors as the engines of future growth. The consumption-led, debt-financed economic growth of recent years has reached its limits, and growth has slowed, said finance minister Nhlanhla Nene in his first Medium Term Budget Policy Statement last week. “The growth rate is set to improve over the next several years as new energy and transport investments start to operate, exports increase and investment recovers,” the document adds. It says the economic slowdown has “highlighted structural constraints in the economy. A number of factors that were perceived as temporary have become embedded into expectations. “These include tightness in electricity supply, labour tensions, skills shortages and transport constraints”. In his maiden budget speech Nene said government would continue funding infrastructure development in order to support industrial growth. “We import considerably more than we export,” he said. In order to grow the economy by 5% a year and to “transform our social and economic order,” the government has had to address a number of challenges. These include “how we organise transport, energy and communication networks; how we manage cities and local government; and how we engage with Africa and the rest of the world. “We cannot achieve this vision if we remain on our present economic path. We have to navigate a definite change of course, taking all South Africans with us,” he said. Nene recognised the role of logistics in supporting manufacturing by listing “logistics improvements” as one of the areas being supported by government. “A new framework for special economic zones has been introduced. It allows for targeted incentives, logistics improvements and active partnerships between businesses, municipalities and development agencies”. As with previous budget speeches and the budgets of the department of transport, government seems to place greater emphasis on the movement of people rather than goods. “Passenger Rail Agency of South Africa has concluded a R53-billion contract to replace over 500 commuter trains over the next ten years. Transnet is expanding and improving its infrastructure and services,” he said. In its adjusted estimate for the year the department of public works (under which Transnet falls) reports that: “In the first six months of 2014/15, the focus has been on finalising support packages for state-owned companies”. Looking ahead, he said “a national appropriation of R1.2 trillion in 2015/16 is proposed, rising to R1.3 trillion in 2016/17. “The proposed division of revenue allocates 48% to national departments, 43% to provinces and 9% to local government over the MTEF period. INSERT & CAPTION Government needs to address how we organise transport, energy and communication networks. – Nhlanhla Nene