Busa: curb cost of debt

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Johannesburg - South Africa must avoid debt service costs and government wages absorbing too much of government resources, Business Unity SA (Busa) said on Monday.

“Like tax-and-spend, borrow-and-spend also has its limits,” Busa special policy adviser Raymond Parsons told reporters in Johannesburg.

“We want to see these limits in the budget.”

Parsons was briefing reporters on what Busa would like to see in Finance Minister Pravin Gordhan's budget speech, which will be delivered in Parliament later this month.

Busa supported the conservative approach to state spending, but remained concerned by the public sector wage bill. There needed to be a balance between consumption and investment spending by the state.

Improving state capacity and mobilising the private sector capacity was essential to maximise impact.

“We need to make sure we are spending on the right things and getting value for money,” said Parsons.

The fiscal stance had to remain in line with the messages given in last year's budget speech and the mini-budget to strengthen business and investor confidence.

South Africa needed to enhance certainty and predictability in fiscal policy.

Parsons said the budget speech had to take a business-friendly approach.

It also needed to be aligned with the National Development Plan and with growing the economy.

The budget had to provide the limits that the country's debt to gross domestic product (GDP) ratio of fiscal deficit should not exceed.

“South Africa's headline fiscal ratios may appear safe, but this can mask vulnerabilities Ä margin for error in an uncertain world is great,” he said.

Gordhan needed to give South Africans a lesson in economics to remind South Africans that financial resources were finite. South Africa did not want to become a tax-and-spend economy.

“This is the bane of many other countries,” said Parsons. The gap between talk and action needed to be narrowed. - Sapa

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