Economists and analysts have cautiously congratulated Finance Minister Pravin Gordhan on his 2016 Budget Speech, which they said signalled some movement in taking the economy in the right direction, but warned of serious risks ahead.

“The National Treasury delivered a conservative budget, which is to be appreciated, but the negative outlook is not going to go away. We need to see how the National Treasury and others can manage in a prolonged period of low growth,” ratings agency Standard & Poor’s Africa regional manager Konrad Reuss said at a Bloomberg Africa Business and Economic Summit in Cape Town.

He added that the South African government still needed to address the backlog around key legislation, including labour legislation. 

“All these agreements, from collective bargaining to trade agreements that have been negotiated for a very long time, are taking way too long,” he stated, adding that it had impacted on investor confidence.

Standard Chartered Bank MD and head of Africa Macro Research Razia Khan said South Africa needed to create a buffer around global risks, with more confidence needed in policy direction. But Gordhan’s speech had been an important start.

“The spending cuts show an intent to take the economy in the right direction.”

She further noted that the Budget had created a degree of hope and optimism that things were going down a slightly better path.

“There wasn't this big difference in terms of a new tax proposal, but the important thing is that South Africa may be seeing its first primary fiscal surplus since the financial crisis,” said Khan.

Competition Commissioner Tembinkosi Bonakele, meanwhile, commented that he would have liked more detail about the future of State-owned enterprises (SOEs), but was hopeful that more details would be revealed soon.

“I think people are still going to live with SOEs, but are calling for proper governance and efficiency.”

Goldman Sachs International partner Colin Coleman highlighted the shifting attitude towards SOEs, like Transnet and Eskom.

“What we have to look for is smart engineering in SOEs, not classic privatisation. The Minister did point to greater participation of private capital in SOEs. Introducing third-party capital would be something smart, helpful and efficient.”

He said the government needed to be more decisive about which assets it considered strategic.

Meanwhile, Bonakele called for certainty in the current election year, where there was both inter-party and intra-party contestation.

“You’ve got to reach a point where you are decisive about certain things,” he stated.

Coleman expected a tough journey ahead.

“The market is going to be brutal about assessing the level at which activity takes place. We need implementation of structural reforms to achieve higher growth. We need to see that the knife is cutting into the economy in a proper and decisive way.”

However, he said it was very encouraging that business and government leaders were now meeting more often.

“What is totally unprecedented is the degree of top-level CEO engagement with government. The most senior brains of the business community are trying to work on this.”

Coleman called on government, labour, civil society and ordinary South Africans to redouble their efforts to avoid a sovereign ratings downgrade  and to get behind Gordhan’s vision and make things happen.