South African investment expert Steven Nathan said on Wednesday that government has dug itself into a hole over time with bad policies and that its true deficit of R203 billion was actually 15 percent of its revenues, not the 4.3 percent in 2017/18.
In his speech, Gigaba said South Africa’ budget deficit would grow from the 3.1 percent February budget target to 4.3 as a result of slowing growth, a revenue shortfall of R50.8 billion and shoring up struggling state-owned enterprises.
Nathan, the chief executive officer of 10X Investments, said the statement confirmed that the government was a poor role model for how to run its finances.
“To narrow this deficit, revenues must grow substantially faster than expenses. Government has direct control of its expenses and thus must reduce expenses quickly or we will continue to grow our debt,” said Nathan.
“To me, it is obvious that government must cut spending quickly as it is highly unlikely that tax revenue will grow even much as inflation over the next few years.”
Nathan said that ballooning deficits at a national level should serve as a reminder of the need for steady and disciplined behaviour by individuals and families.
Gigaba mentioned retirement planning only in passing and made no mention at all of further reform or incentives to improve South Africa’s poor savings culture.
He outlined projections for 2017 that were worse than all but the worst pre-speech expectations. The forecast tax revenue shortfall came in at the very top end of estimates, R50.8 billion in the current year, the “largest under-collection since the 2009 recession”.
South Africa also slashed its projected gross domestic product (GDP) growth forecast for 2017 by almost half, from 1.3 percent forecast in the February budget to 0.7 percent, as a result of continued decline in business and consumer confidence that has gathered pace since 2014.
The rand took a dive after Gigaba presented the MTBPS, trading at 13.93 to the dollar from 13.74.
– African News Agency (ANA)