Slow growth rate key challenge – analysts

The NDP is government's vision for South Africa, paving the direction the country is taking with economic growth and education at its centre.

KPMG's tax experts shared this view during their annual post-budget speech discussion at the Summerstrand Inn, Port Elizabeth, yesterday.

KPMG associate director Lullu Krugel said Gordhan had his work cut out for him on Wednesday taking into account the global economic difficulties, as well as South Africa's turbulent climate caused by countrywide violent strikes which led to three credit rating downgrades.

Krugel said Gordhan had to deliver a message through the budget to address these problems.

She added she believed he did have some success in addressing the issues, but the biggest challenge he faced was the country's slow growth rate. "His revised forecast was 2.7% for the year. The market is, however, more conservative and expects only 2.5%," Krugel said. "This is well below the target of a 5% sustainable growth the NDP set as a target."

She added the inflation rate could also increase above the 3 to 6% target range despite Gordhan's forecast of 5.6% for the year.

She said this month's fuel price increase and Eskom's average 8% tariff increases announced yesterday would push inflation up.

"Don't be surprised if we get a shocker in June or July this year [in terms of inflation]."

She, however, added this was not likely to end up in an interest rate hike as the economy was under pressure and did not allow for such measures. On the other hand, Gordhan succeeded in providing incentives to drive the economy and encourage growth.

KPMG associate director in the company's tax department, Tanette Nell, said the tax incentives for business that position themselves within economic zones – which once finished, will include the Eastern Cape's Coega and the East London IDZ – would be a welcome boost to the economy.

The increase of turnover thresholds for small businesses would also help to accomplish NDP goals.