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Road to economic recovery ‘steep and extremely challenging’: Ramaphosa

President Cyril Ramaphosa says SA spends more on debt service costs than on health, basic education and policing. File image.
President Cyril Ramaphosa says SA spends more on debt service costs than on health, basic education and policing. File image.
Image: GCIS

SA’s path to economic recovery after the devastation of the Covid-19 pandemic is “steep and will be extremely challenging”, President Cyril Ramaphosa said on Monday. 

However, with the 2021/22 budget presented by finance minister Enoch Godongwana and co-operation from all stakeholders, the country will succeed, he wrote in his Monday weekly newsletter.  

“As the pandemic has battered the economy, so it has further worsened the country’s financial position. At the height of the pandemic, less revenue was collected and more money had to be spent on strengthening our health response and providing social support. As a result, the country had to borrow more and do so at a greater cost,” he said.  

Godongwana said SA's debt burden was a serious concern, as it mounted to more than R5-trillion in the medium term.

Before his budget speech, the EFF marched to parliament to protest against what it called the “senseless and crippling loans” the government takes from the World Bank and International Monetary Fund (IMF).

Ramaphosa rallied behind the National Treasury’s efforts to reduce public debt.

“The interest rate we pay on our debt is higher than our growth rate, creating a risk that debt could spiral out of control if not managed carefully. Our country spends more on debt service costs than on health, basic education and policing.

“Unsustainable levels of debt are bad for all South Africans, but for the poor in particular. The cost of debt reduces the amount of money government has to improve services, provide social protection and invest in social and economic infrastructure.

“With this budget, we are on track to reduce our budget deficit — and hence our borrowing requirements — while responding to the challenges South Africans face now and into the future,” Ramaphosa said.  

The budget is indicative of the government’s commitment to achieve what Ramaphosa said was a difficult balance.

“But with more efficient use of resources, ending wastage and corruption, and shifting spending from consumption to investment, we can achieve fiscal sustainability while continuing to support growth.”

While unemployment remained at an all-time high, Ramaphosa said the government had extended the Presidential Employment Stimulus, which has provided work and livelihood opportunities to more than 800,000 people in its first 16 months.

“An additional R18.4bn has been allocated over the next two years so the stimulus can continue to provide vital income, skills development and work experience to hundreds of thousands of unemployed and mostly young people.”   

Ramaphosa said his announcement of the extension of the R350 social relief of distress grant for another year was another indication Godongwana’s budget “seeks to leave no-one behind”.

“This will provide basic support for about 10-million unemployed beneficiaries as they look for work. This grant broadens the country’s social safety net, with about 46% of the population receiving grants.

“Even with our severe fiscal situation, the budget directs resources to areas with the greatest potential for growth and jobs, specifically structural reform, infrastructure and support for small businesses. It supports young people through public and social employment programmes and extends social protection for the most vulnerable.”

Ramaphosa hailed the Treasury’s decision to set aside R15bn for a redesigned loan guarantee scheme that will make it easier for small businesses to access funding to “bounce back” from the effects of the pandemic.

TimesLIVE


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