Zero-based budgeting will be instrumental in curbing public debt, according to Business For South Africa.
The organisation, which represents a vast majority of business organisations in the country, on Friday released a 12-point economic recovery plan, estimated to require R3.4 trillion over the next three years.
During a briefing on the plan, B4SA’s Martin Kingston highlighted some projections for economic growth, which are in line with Treasury and the Reserve Bank’s estimates. B4SA sees growth contracting by about 10% this year, followed by a recovery of at most 5% in 2021 and 6% in 2022.
This is based on the assumption that SA follows a path of zero-based budgeting, an idea touted by Finance Minister Tito Mboweni in an effort to curb expenditure to avoid a sovereign debt crisis. With a zero-based budget, every expenditure item would have to be justified in terms of whether they are necessary, and only growth-enhancing expenditure would be prioritised.
The zero-based budget should be coupled with limiting expenditure growth to below inflation, efforts to reduce the public sector wage bill and reduced funding requirements of local government and state-owned enterprises.
This also calls for no increases in tax rates, however increasing tax collection is possible with higher growth and through improved administration, according to B4SA.