Geoff Jacobs, president, Cape Chamber of Commerce and Industry
Given the sharp lesson on the importance of the economy that all South Africans got thanks to the Covid-19 lockdown, the Supplementary Budget statement by the Minister of Finance, Tito Mboweni, was a little light on detail for most people’s tastes, but bleakly honest about the state we are in.
Those who followed the news leading up to Minister Mboweni’s statement would have known that there are – details – or should one say, plans – for dealing with the appalling financial situation the country is in.
What the minister wanted and needed to deliver to Parliament was an awful warning – and he certainly did that.
The South African state can no longer continue to spend money it does not have; it cannot borrow its way out of the financial quagmire it has created through runaway expenditure on salaries for public servants; perks and privileges for politicians and municipal officials; and the continued propping up of state-owned enterprises.
Minister Mboweni chose his words carefully, but left us all in no doubt: the country is at the crossroads. If we continue as we are, in a mere three years’ time, we will create a sovereign-debt crisis – in plain language, we will be unable to pay back even the interest on the loans with which this government has lumbered us.
The details that were mentioned revealed the depth of the financial pit we are in. Government intends to borrow $7 billion, or R118 billion in today’s money, and more if inflation gets a hold, as it might.
Who will lend it to us is still largely unanswered. $1 billion has been secured from the New Development Bank, but which way the World Bank and the International Monetary Fund will jump is still unknown, but, in any event, it will all have to be paid back.
As it is, South Africa’s national debt already amounts to a dangerous 81.7% of the entire gross domestic product (GDP) of the economy. It reached this alarming level in the past two months from when it was already at a high R3.56 trillion or 65.6% of GDP. These are red lights to any economist and should be glaringly obvious to politicians as well.
At the end of the minister’s statement on Wednesday, the challenges the country faces were clearer than ever: the money-gobbling state-owned enterprises; the over-manned and overpaid civil services (especially at the top level); the debt-stricken municipalities; the pie-in-the-sky national health system; and the insane plan to confiscate private property without compensation that on its own will scare off any private investor, leaving the World Bank and the International Monetary Fund the lender of last resort.