MTBPS: Tito Mboweni laid bare SA’s economic woes but offered little in the way of solutions
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Cape Town – Finance Minister Tito Mboweni this week lifted the lid of the state of the country’s finances, affirming that the economy was buckling under pressure with no room to allocate more fiscal resources.
Drowning in debt
In his Medium Term Budget Policy Statement on Wednesday, Mboweni signalled that if debt does not stabilise at 95% of GDP in five years, the country’s economic woes will further deepen.
Last year Mboweni said it was acceptable if debt was below 30% of GDP, but once it reached 50% it was a crisis.
On Wednesday, he said that debt would grow from R3.9 trillion to R5.5 trillion in the next five years.
Mboweni also said the deficit has widened to 15.7% from the projected 6% in the February Budget.
He said they expect the deficit to narrow to 7.3% in the 2023/24 financial year.
“The economy is expected to contract by 7.8%, recovering to real GDP growth of 3.3% in 2021. Economic growth is expected to average 2.1% over the three-year forecast period,” Mboweni said in his MTBPS.
The National Treasury also wants to increase the tax base to maintain fiscal consolidation.
The tax revenue will decline by R322bn this year.
“To assist with the consolidation, government has projected tax increases of R5bn in 2021/22, R10bn in 2022/23, R10bn in 2023/23 and R15bn in 2024/25,” stated the MTBPS.
Public service wage bill
To relieve some strain on the public purse, Mboweni proposed cutting the public service wage bill by billions of rand for the next four years, a move quickly rejected by unions who vowed to fight tooth-and-nail to protect their members’ salaries .
Cosatu and its affiliated unions want Mboweni to reverse the decision to freeze the salaries of public servants.
Mboweni also wants to reduce the salaries of politicians at national, provincial and local levels to cut the public sector wage bill.
From the dismal state of affairs outlined by the finance minister it is clear that the pressing demands for relief for the poorest citizens and investment in public resources are outstripped by the debt.
Limited relief for poor
Civil society has called on the government to continue with the top-up grants, but Mboweni announced on Wednesday that the R350 grant for the unemployed will only remain in place until early 2021.
Despite the government’s expansive social relief package, the public purse will not be able to sustain some of the programmes without the intervention of private sector investment in the economy, the finance minister said.
More money for SAA
Meanwhile, Mboweni has announced a R10.5 billion cash injection for national carrier SAA. The airline is in business rescue and Mboweni said the money would be used to implement the business rescue practitioners’ plan.