Budget does not meet basic requirements to avert government’s debt crisis

30 October 2019

The important medium-term budget policy framework of Mr Tito Mboweni, Minister of Finance, does not meet the basic requirements to alleviate the debt crisis in which the country currently finds itself. It is becoming increasingly clear that the ANC simply does not have the ability to turn the situation around.

After years of poor governance, squandering and misappropriation, South Africa is now caught in a vicious cycle where government revenue is continually decreasing while expenditure, particularly as regards salaries, debt repayment and social grants, keeps increasing.

The ruling party failed to address one of the biggest problems – the government's wage bill – even though it is abundantly clear that the savings methods for the wage bill that were announced in February are not having the desired effect.

The single biggest hurdle here is the trade unions that do not allow the government to address the unsustainable wage bill.

The attempts to cut back on government debt, like reducing the size of the Cabinet and decreasing travel costs, are merely cosmetic and will make no real difference to the exorbitant level of government expenditure.

For the next three years, the government will spend more on financing its debt than on health and economic development. It is not sustainable. Over the next three years, government debt is expected to increase to R4,5 trillion. By 2022/23, it will comprise 70% of the country's gross domestic product (GDP).

According to Minister Mboweni, the tax revenue collected this year will be R53 billion less than what was budgeted in February. Thus, the budget deficit increases to 5% of the GDP.

As a result of policy uncertainty and failing infrastructure that lead to poor economic growth (estimated economic growth for 2019 is 0,5%), unemployment will keep increasing and the pressure on the government as regards social grants will continue to become greater and that will inevitably result in more government debt. At present, approximately 17,9 million people are dependent on social grants.

In addition to less-than-expected tax revenue, the collection of municipal rates and taxes is also decreasing. And unlike in the past, there is no money in the national fiscus to allocate, with the accrual budget, to municipalities for infrastructure development.

Concerning e-toll, the Minister announced that it will remain in place and that measures will be implemented to ensure that outstanding monies are collected.

While financial aid to public enterprises was once again increased over the medium term and taxpayers have to cover it, no re-prioritisation of funds for drought relief was announced and it is extremely disappointing.

Towns and cities countrywide are headed to "Day Zero" for water availability. The agricultural sector is buckling under the pressure of the drought and bankruptcy is a common occurrence. Food security is at risk and yet the government apparently does not regard it as a priority.

On a personal level, the tax burden on taxpayers is becoming greater. It seems that we can expect drastic increases in taxes in February 2020 so as to make up for the great budget deficit.

The FF Plus feels that there is nothing in the medium-term budget policy statement that indicates that the ANC-ship will be able to avert a disastrous collision with an iceberg in the near future. No real solutions were offered, there was no real change in direction and priorities remain misguided. The noose around the neck of every single taxpayer in this country is drawing tighter and tighter.

Issued by Pieter Groenewald, FF Plus leader, 30 October 2019