'Why downgrade us when we are closing the mouth of the hippo?'
JOHANNESBURG - Finance Minister Tito Mboweni said yesterday that he did not expect any further credit downgrades given that the government was doing whatever it could in a difficult situation.
Mboweni told journalists following his Medium Term Budget Policy Statement (MTBPS) that the National Treasury was in regular communications and was scheduled to meet with ratings agency Fitch later yesterday.
He said the government would not hide the country's fiscal reality from the ranting agencies as it wanted to be transparent with its finances.
“Ours is to engage in robust debate and conversation with them,” he said. “The numbers are what they are. They (Fitch) will then go back to its committees and make whatever decisions they want to make. I cannot pre-empt their decision.
"I don’t see why they would want to downgrade us in particular because we are pursuing an active scenario to control the situation and close the mouth of the hippopotamus.”
Mboweni said the ratings agencies would have to decide on their views based on the true picture of the country’s balance sheet.
“We are of the view that there is no need for further downgrades for South Africa at all.
"I think we have been punished enough during the pandemic.”
Mboweni said that the Covid-19 crisis had led to a steep economic decline and accelerated the deterioration of the public finances, with the economy expected to contract by 7.8percent in 2020 and returning to real GDP growth of 3.3percent in 2021.
He said his MTBPS attempted to stabilise debt to avoid significant expenditure reductions across government including possible pay cuts to management-level positions, across national, provincial and municipal governments, State-owned entities and all other senior public representatives.
Mboweni said globally many companies were reducing compensation and people with security of employment had to at least join the conversation about their own compensation.
“You can’t say, when you are facing a debt-to-GDP ratio of 95percent, that you should continue the same way you have been doing things. We are facing a crisis. I am warning you that if you continue in this direction you are headed for a sovereign debt crisis,” Mboweni said.
The National Treasury’s chief director Edgar Sishi said the compensation of public servants was expected to be about 57percent of tax revenue for the 2020/21 financial year compared with the 41percent of tax revenue in 2019/2020 partly due to the dramatic decline of revenue due to the Covid-19 pandemic.
“It will go back down again next year. It is this year elevated at about 57 percent of revenue,” said Sishi.
Mboweni said the government had made a decision to support SAA's business rescue plan.
“The consequences of that decision was that we had to scramble around to find the R10.5bn to support the business rescue plan.
"I do not take kindly to the DA calling State-owned enterprises zombies,” said Mboweni.