Cape Town — Government needs to prove that it can spend on infrastructure before the private sector will invest in new build projects, Standard Bank chief economist Goolam Balim said today.
He said the private sector was sitting with billions in corporate savings.
"The private sector is in reservation mode because they would like to see government spend and the private sector would like to see those suppliers in it paid timely for their services," said Balim, speaking following the Minister of Finance Pravin Gordhan's Budget Speech.
South Africa still had less than half of the fixed investment - a gross capital formation of 20% of GDP - that other emerging countries in Asia had, Balim told BuaNews, adding that the private sector was key to the country's development, as it accounts for two thirds of investment in the economy.
"The reality is that government has had a substantial infrastructure programme and all of the romance around the World Cup has been an exception rather than the rule in terms of the government or even parastatals in meeting their targets," he said, pointing to the Medupi power station only set to come online at the end of 2012 or during 2013.
But, he said, there was some hope in the setting up of the Presidential Infrastructure Commission, which may be able to get parastatals and municipalities to spend their budgets better.
Turning the initiatives Gordhan outlined for small enterprises, Neren Rau, Chief Executive of the SA Chamber of Commerce and Industry (Sacci), welcomed Gordhan's announcement of a reduction in red tape for micro enterprises when they filed tax returns.
He told BuaNews the minister had also addressed the financing concerns of small businesses by mentioning that a new small business financing agency would be set up under the Industrial Development Corporation (IDC).
However, he said he was concerned about the real impact of the tax relief for small firms announced in the Budget Speech.
Sacci is conducting a survey on all pieces of legislation and how small businesses are defined in each.
"In some cases they are out of sync with one another. Some may use 50 workers as an indication of small businesses, others are using 10 workers for a small business threshold.
"So we want to unify those and try to standardise our definition of SMEs and hopefully lobby for greater benefits for SMEs broadly speaking," he said.