SA's budget deficit much higher than projected - Tito Mboweni

Finance minister Tito Mboweni has warned that the country's budget deficit was much higher than projected by his department and this would impact negatively on economic growth.

Mboweni said this while delivering the keynote address at the Banking Summit 2019 at Park Hyatt Hotel in Rosebank, Johannesburg, on Friday.

Mboweni, who tossed aside his prepared speech to speak off-the-cuff, said the economic growth projections from his well-resourced department were inaccurate.

"[They are] totally out of place. Now you might say why is that the case. Staff at National Treasury is the most well-resourced... why do they have their growth forecast so wrong? The assumptions underlying the forecast have clearly changed. The situation has changed and as it has changed, the underlying assumptions change and the forecast will be different.

"I would look at the budget deficit before borrowing that was projected and found that the adjustment estimates have changed...The actual deficit is probably much higher. I would try to ask myself the question why is this thing like this. I look at the R1,000 we have budgeted to spend [as government]. I find that R350 of that goes to the compensation of the employees, leaving very little for infrastructure investment and growth enhancing activities. I would say that the previous ministers of public administration have signed unmandated agreements of labour to increase compensation. Then I would go for tea break."

He added that he found himself solving financial challenges faced by state-owned companies that he has been labelled minister of bailouts. "When I come back [from my tea break] I find an SMS from [public enterprises minister] Pravin Gordhan which says that SA Express needs a cash injection of R200m by Wednesday, and so I will stress about what to do.

"Naturally, I would say, 'shut it down. Let them park the aircraft somewhere next to Kempton Park.When did they (SA Express management) know that they are short of cash and what did they do about it? Let them park the aircraft'. That is why it's offline for ... about two weeks.

"... (Nedbank chief executive and Banking Association of SA chairman) Mr (Mike) Brown says that for the banking sector to continue providing banking services to state-owned companies, they need government to pass legislation confirming that indeed these contingent liabilities are going to be met. So I say, 'these banks think they can make the law now.' Then I'm enjoying my after-tea and a call comes through from (credit rating agency) Moody's, they say your fiscal position is deteriorating, and if it continues like this our credit or rating committee is unlikely to view SA positively, so do something Mr ministry of finance.

"I say, 'you see, I have decided I am not a minister of bailouts. I am not a minister of compensation of employees in the public service, and I'm not the minister of debt management service office. I'm a minister of finance.' But they would say, 'you are minister of finance really. A huge chunk of your contingent liabilities is about bailing out SOEs, you are signing cheques on the compensation of employees, your allocations for infrastructure investment and growth is low. So that's what you're, the minister of bailouts'."

He said his department was trying to focus on growth-enhancing activities the state could be involved in "while dealing with these other disasters that we have", like agriculture.