And the bad news from finance minister Tito Mboweni is…

It was bad news all round on Wednesday, as finance minister Tito Mboweni painted a dire picture of a government drowning in debt of about R3-trillion, with the civil servants’ wage bill among the biggest threats to SA’s finances.

Minister of Finance Tito Mboweni at medium-term budget policy statement in the National Assembly, Parliament. Date: October 30, 2019. Picture: ESA ALEXANDER/SUNDAY TIMES

In a speech that political parties and labour described as lacking in credible plans to dig SA out of its financial hole, Mboweni said the national debt was expected to rise to R4.5-trillion in the next three years.

“Clearly, we need to do things differently,” he said.

“As things stand, without any policy adjustments, debt will most likely exceed 70% of GDP by 2022/2023.

“This is a serious position to be in.

“Our little aloe is not doing well. It needs attention, like our public finances.”

In his maiden budget speech in February, Mboweni used the aloe as an analogy for the wilting state of SA’s financial affairs.

Addressing MPs on Wednesday, he said: “We need to rock the boat. Shake the baobab tree. Do the unusual, disrupt the comfort zones. Get things moving.”

And in rocking the fiscal boat, Mboweni slapped cabinet ministers, their deputies, premiers and MECs with a pay freeze from December 1 — for the foreseeable future.

In fact, Mboweni said, their pay packages were likely to be adjusted downwards in the next three years as part of his measures to reduce the burgeoning public sector wage bill.

Since 2006, the public sector salary bill has tripled from R154bn to R518bn in 2019, or 46% of total tax revenue, largely due to above-inflation wage hikes.

“We will need to deal with the challenges of the wage bill, state-owned companies, executive remuneration and benefits and fiscal leakages,” he said.

The average wage increase across government was 6.8% in 2018/2019. This was 2.2% above inflation.

During his media conference earlier, Mboweni blamed former public service and administration ministers, Richard Baloyi and Faith Muthambi, saying it was during their time that the government had entered into above-inflation wage agreements.

“It’s Richard Baloyi and Faith Muthambi who got us into this mess and they must be held accountable for this,” he said.

“They signed agreements outside the  mandate and one of them has been made ambassador … this is unbelievable and we must call a spade a spade and not a big spoon.”

Mboweni also clipped the wings of the political high-flyers, banning them from flying business class on domestic trips and capping their spending on official vehicles to no more than R800,000.

He said the ministerial handbook would be amended to give effect to his new austerity measures.

Mboweni said ministers, their deputies and all political office-bearers would no longer be paid subsistence and travel allowances for both local and international trips.

He is also gunning for the reduction of the cellphone allowances of his cabinet colleagues, telling parliament that a cap would be placed on what could be claimed from the state.

Mboweni said the government was expecting to collect R1.3-trillion in taxes, 4% less (R53bn) than projected in February.

“We have been shuffling about in old and comfortable brown shoes,” he said.

“Our expenditure continues to exceed our revenue.

“Our national debt is increasing at an unsustainable pace. The economy is not performing well.

“As any farmer will tell you, if you want a bumper harvest, you must be prepared to work hard during the end of winter and early spring.

“Because what you do to the soil then determines how successful your crop will be.

“Now is the time. We cannot wait any longer. If we want a successful harvest, we must act today.”

Mboweni also announced that:

  • The National Prosecuting Authority would receive an additional R1.3bn to combat corruption;
  • The SA Revenue Service received an additional R1bn to improve revenue collection;
  • More than 14,000ha of land would be released for human settlements development; and
  • The SA Reserve Bank would propose a modern, transparent and risk-based approval framework for the cross-border flow of money.

SA is also set to spend more to service its debt than it does on health care.

Mboweni warned that SA would get caught in a debt trap if urgent and drastic cost-cutting measures were not put in place.

“The consequences of not acting now would be gravely negative for SA.

“Over time, the country would likely face mounting debt service costs and higher interest rates and may enter a debt trap.

“The unemployment crisis will worsen, and government debt could balloon. This is an outcome we are determined to avoid,” he said.

Eskom remains the biggest risk to the economy as it is R450bn in the red.

The power utility, which will be broken into three separate units — generation, transmission and distribution — will receive R230bn in government support over the next three years, mainly to service its debt.

Economic growth is forecast at 0.5% in 2019, gradually rising to 1.7% in 2022, while a tax revenue shortfall of R52.5bn in 2019/2020 and R84bn in 2020/2021 is forcing the government to borrow more to meet its financial obligations

Economics expert Charles Wait said state-owned enterprises such as SAA continued to bleed money.

“And we’re still not closing it down,” he said.

“I appreciate that if we do close it down, the state will still have to pay the debt because the state guaranteed it.

“But if we close it down, we won’t close down the debt but we’ll close down on the compilation of debt over time.”

DA MP Geordin Hill-Lewis said Mboweni had revealed the true horror of SA’s precarious financial situation and welcomed his tough talk on cutting the public wage bill and on the mismanagement of SOEs.

“But the minister’s number one priority in this speech was to present a credible plan to control national debt and rein in the deficit.

“The fact is that he did not do this —  for all the tough talk, the minister’s bark was worse than his bite.

“The spending cuts he did announce — roughly R50bn over the next two years — will not be nearly enough to slow down the ballooning of national debt, and will not be enough to restore credibility with ratings agencies,” Hill-Lewis said.

ANC national spokesperson Pule Mabe said Mboweni’s speech came at a difficult time in the country when the release of the latest employment figures showed an increase in the unemployment rate.

“The ANC notes the measures proposed by the minister to ensure that we tighten our belts and reduce wastage, across all spheres of government, without cutting essential services.”

Cosatu parliamentary co-ordinator Matthew Parks said Mboweni had failed to rise to the challenge.

“It appears that the government does not know what to do.

“The pontification by the Treasury does not help matters either.

“We are running out of time. It is clear that this cannot be left to tepid ministers any more,” he said.

BY MICHAEL KIMBERLEY AND THABO MOKONE – HeraldLIVE

— Additional reporting by Nomazima Nkosi

 

 

 

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