Oct 25, 2018 7:37:43 PM

Response to mid-term budget: "It is time for action"

Topics: mid-term budget, tough economic times, wasted expenditure, growing economic pressures, economic uncertainty 0

During yesterday's mid-term budget speech by newly appointed Finance Minister, Tito Mboweni, key factors putting a lot of strain on our economy were addressed in a more aggressive stance. However, the time for talk is over, and we need to see the results of policies and implementation plans otherwise economic stagnation will continue to remain a major concern.

There is no doubt growing economic pressures and instability with government finances have raised a lot of concerns related to long-term investment and certain sectors of the real estate market have been hard hit over the past few months. As government increases taxes to recoup mismanaged funds the consumer is the one who carries the financial burden.

It appeared as if the common denominator on the path to recovery in the Minister's speech was the actions taken and to be taken by President Ramaphosa. Of course a concern remains that Treasury’s low growth means debt service costs will rise to 18% of all government spending in 2026 – which translates into almost R1 out of every five going towards paying off loans.

Minister Mboweni also said that National Treasury has downgraded the expected 2018 growth rate to 0.7%. Even though the National Development Plan has a goal of 5.4% annual GDP growth, our GDP growth has averaged just 1.8% over the past few years. It is, therefore, safe to say achieving the NDP's goals is rather unrealistic at this rate.

We welcome the announcement that housing subsidies amounting to R1 billion will be centralised to better support middle- and lower-income home buyers.

It is imperative the Minister clamps down on wasted expenditure and tries to mitigate the factors leading to drastic economic cycles that create long-lasting fluctuations.

The real estate market is susceptible to economic uncertainty and the Minster needs to restore confidence to ensure local and foreign investors are willing to increase purchasing activity.

Statement by

Richard Gray

Harcourts Africa Chief Executive Officer