Finance Minister Tito Mboweni told Parliament on Wednesday that this year’s national debt exceeded R3 trillion and was expected to rise to R4.5 trillion in the next three years. File Photo: AP

CAPE TOWN – Finance Minister Tito Mboweni told Parliament on Wednesday that this year’s national debt exceeded R3 trillion and was expected to rise to R4.5 trillion in the next three years.

“Clearly, we need to do things differently,” said the Minister when delivering his second Medium-term Budget Policy Statement. 

Mboweni said as things stood without any policy adjustments, debt would most likely exceed 70 percent of gross domestic product (GDP) by 2022/23. “This is a serious position to be in. Our little Aloe is not doing well. It needs attention, like our public finances.”

The consolidated budget deficit is now projected at 5.9 per cent of GDP in the current year. “If we exclude Eskom, non‐interest spending would have been R2.9 billion less than projected,” said Mboweni.

The Minister said the country’s fiscal framework had weakened substantially since the February budget, mainly due to weaker economic growth and lower revenues.   

The main changes to the in‐year expenditure projections are: 

  1. R26 billion in additional financial support to Eskom 
  2. R11 billion to several smaller state‐owned companies in financial distress 
  3. R430 million approved through the Budget Facility for Infrastructure for student housing 

Mboweni said these increases were partly offset by drawing on the contingency reserve, provisional allocations and declared unspent funds. 

“That said, savings from the compensation measures announced in the Budget have not materialised as expected. Thus, in total, non‐interest spending rises by R23 billion this year, relative to the February estimate…

“Honourable members, there is no status quo option! Stabilisation involves difficult decisions that imply sacrifices by all of us. 

“Slowing growth in the compensation bill and additional revenue measures will be needed. The consequence of not acting now would be gravely negative for South Africa.

“Over time, the country would likely face mounting debt service costs and higher interest rates and may enter a debt trap. The unemployment crisis would worsen, and government debt could balloon. This is an outcome we are determined to avoid. Additional measures will be announced in the 2020 Budget,” the minister said in his statement.

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