If you have ever had any doubt about the dire state of South Africa’s finances, look no further than this sobering line from finance minister Tito Mboweni’s budget speech on Wednesday: “We are borrowing about R1.2bn a day, assuming that we don’t borrow money on the weekend.”
Mboweni revealed expected revenue of R1.58-trillion and spending of R1.83trillion, which effectively means that the government spends R243bn more than it earns. Real economic growth for 2019 is expected to rise to only 1.5%.
This paints a grim picture of our public finances and lays down an unquestionably strong case for the hard line taken by Mboweni on fiscal spending.
At the centre of the crisis are our state-owned enterprises which, thanks to years of mismanagement and corruption, are the weakest link to our fiscal health.
Listen to further analysis of the budget here:
Therefore Mboweni’s stance on SOEs must be welcomed. We cannot continue to pour money into these entities without strictly enforceable turnaround conditions which compel them to shape up and be accountable.
Further, Mboweni announced a range of measures, including early retirement for older public servants, a freeze on salary increases for politicians and top public servants, and limits on overtime and bonuses.
With this the minister hopes to drastically cut the salary bill, which is an unsustainably large part of the country’s expenditure.
One thing is for sure – Mboweni and President Cyril Ramaphosa are in for a major pushback, especially from political allies who sit on the opposite side of the ANC’s factional or ideological divide.
How they will navigate the party’s political terrain, especially in the run-up to an important election, is yet to be seen.
Mboweni’s budget demonstrated in no uncertain terms that fiscal prudence is no longer optional.
It is the only way we have to turn the corner and save our economy from the skids.
At the very least, this we must agree on.