SOWETAN | State needs plan for SA’s debt burden

Finance minister Enoch Godongwana’s mini budget speech this week has laid bare a grim picture of the state of SA’s finances that ought to have all of us worried.

Not only is the debt escalating, according to Godongwana, but so is lower than expected economic growth that further adds to the prospect of misery in the future. The medium-term budget policy statement on Wednesday underscored a country flirting with danger where what it owes as a percentage of GDP exceeded previous estimates by 0.9%.

Economist Dr Azar Jammine said it had become more expensive for the government to borrow money, adding that the more it pays on interest, the less it must spends on anything else.

It doesn’t take a rocket scientist to figure out that this is a precarious situation that will result in cuts in social spending even though Godongwana for example has extended the social relief of distress grant until 2025.

The R350 per month grant was introduced at the height of the Covid-19 lockdown in 2020 to cushion unemployed people who were not part of the social security net from adverse economic conditions.

There is hardly any evidence that suggests that those adverse economic conditions have changed or would have significantly improved come 2025.

In fact, the public ought to know that their government is facing financial trouble with the cost of servicing debt as highlighted by the finance minister higher than the government’s spending on police and education.

This reading, taken in the context of a sluggish economy that is 0.1% lower than the projected growth in February, is more reason to be concerned. Godongwana admitted that public finances are significantly weaker because of lower revenue performance, higher public sector wages and debt.

The cold and uncomfortable truth is that now more than ever the prospect of tax hikes appears real. The mini budget statement appears to admit this much with suggestion that the minister will in next year’s budget propose tax measures to raise additional revenue in the 2024/2-25 financial year.

The biggest concern about this is how hard-pressed South Africans will be expected to give more when their own economic conditions are so dire.

But more importantly many South Africans would want to know how their government intends to pull us out of this and what sound plans are there to cushion them from the hardships of the adverse economic conditions.