MTBPS shows SA needs a new government

Finance Minister Enoch Godongwana presented the Medium-Term Budget Policy Statement (MTBPS) last week, which painted a picture of a country in the fast lane to fiscal instability.

South Africa’s debt is expected to reach R4.8 trillion at the end of the year, which, according to the minister, will swell by more than R550 billion per year for the next two years to reach R6 trillion in 2027. This will push the debt-to-GDP ratio to 77%, the highest it has ever been in South Africa’s democratic history.

In 1994, it was around 50% and hit a low of 23.5% in 2009. Unfortunately, since then, it has been all downhill.

I analysed a few national budget documents and found some interesting statistics. In 2009, South Africa’s total debt was R630 billion. Godongwana expects the total debt to reach R4.8 trillion in February next year.

ALSO READ: MTBPS 2023 in a nutshell: Budget cuts and more

This means our total debt has exploded by an astonishing 662%, or around 15% a year over the past 15 years.

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Debt is not always bad. The question is whether the government used the debt productively.

Theoretically, a government should only borrow money to invest in infrastructure to stimulate and boost economic growth. This increase in growth would result in higher tax revenues, which should be used to repay the debt.

Unfortunately, this did not happen.

In 2009, South Africa’s GDP was R2.3 trillion, tripling to R6.7 trillion in 2023. This means GDP grew by 200% in 15 years and 7% per year (in nominal terms).

The investments, therefore, did not lead to any significant economic growth.

The question is, what did the government spend the money on? It was certainly not spent on improving electricity and logistics infrastructure.

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Eskom and Transnet have virtually imploded.

ALSO READ: MTBPS: the scary and worrying parts

Very little investment was in basic service delivery infrastructure such as water and sewage. Most cities and towns are facing water shedding, and in Tshwane, people died from cholera in the drinking water.

The only thing I can think of is the World Cup stadiums around the country and perhaps the highways Sanral built, but that was with the help of tolls and the private sector.

The ANC-led governments under former president Jacob Zuma and current president Cyril Rampahosa have not only failed to provide South Africa with the infrastructure and economic environment in which our children can thrive, but have left them with a depressed economy and a mountain of debt they will have to repay.

South Africa is facing massive fiscal problems, which the ANC has shown over the past 15 years it cannot fix.

Godongwana’s latest budget underlines it once again. There is no political will to do what needs to be done.

Godongwana announced spending cuts of R21 billion for the current financial year. This represents less than 1% of the total expenditure budget. The planned cuts for 2025 and 2026 are R64 billion and R69 billion respectively, which equates to only 3% of total expenditure. It is like drawing a toothpick in a gunfight.

Bloated government 

The most logical place to start is to cut the number of government ministries. I counted 29 ministers and 36 deputy ministers on the national government’s website. That is a political executive of 65 people.

We don’t only need fewer ministers and deputy ministers. We need new ones. South Africa needs a new administration.

Recent attempts by opposition parties to form a broad alliance were fraught with bickering about trivial challenges compared to the fiscal cliff South Africa is racing towards.

We need opposition parties to unite against a fiscal collapse. With debt levels at 77%, we are not in a full-blown crisis, but we will be if the ANC continues for another five years.

This article is republished from Moneyweb under a Creative Commons licence. Read the original article.