Residents of Johannesburg are advised to tighten their belts as the cost of living is set to soar following the budget speech by Minister of Finance, Tito Mboweni on 20 February.
This is according to Wits professor at the School of Economics and Business Science, Lumkile Mondi who gave a brief analysis of Mboweni’s speech. Mboweni revealed that South Africa’s spending would be higher than the revenue collected in the coming financial year. Revenue was expected to be R1.3 trillion while spending would be R1.5 trillion, a R2.15 billion deficit. Due to the deficit, South Africa will be borrowing R1.2 billion a day.
Mondi said the country was living beyond its means. “It means that our children and their children will inherit a bankrupt regime which is very disappointing because we continue to borrow money instead of building the economy,” he added.
Mondi said residents of Joburg would need to continue to sparingly manage their finances as the City of Johannesburg would also increase costs when tabling its budget speech in July.
“The cost of living is already high in Johannesburg. With the current budget speech, people would be required to cut costs, sell a big car to get a smaller one and for some to sell their cars and use public transport. People would need to look at assets they don’t really need, sell them and pay existing debts. Some would also have to move into a smaller house or place to keep afloat and survive the economic conditions.”
Furthermore, he said the increase of the fuel levy by 29 cents per litre for petrol and 30 centre for diesel would only exacerbate the problem. “The fuel levy will hit hard in the absence of universal public transport. Food prices will also increase and vegans will be paying way higher than they do now. E-tolls are not a bad thing because we need to pay for world class road infrastructure but with the current economic conditions it would be very hard for citizens to pay.”
Mondi said Mboweni’s speech lacked programmes or initiatives for economic growth which could have had an impact on employment opportunities in the country. He highlighted that the increase in the cost of living and the lack of economic growth would make more people depend on the economic social wage which included foster care, child support, old age and disability grants, which would not be sustainable in the long run.
He hailed President Cyril Ramaphosa’s unbundling of Eskom but said the R23 billion it would receive yearly for the next three years to financially support it during its reconfiguration was like throwing money down the drain due to corruption and mismanagement.
“The unbundling of Eskom was a good decision provided it leads to the privatisation of the generation division [that] would bring in competition which the law doesn’t allow currently.”
Mondi said the allocation of R717 billion for the health sector including National Health Insurance (NHI) was a blessing in disguise because it meant that there would not be enough money to implement the NHI system.
“The public health system is failing. Merging the public and private sector is naïve. The state needs to jerk up stability first. Corruption in the public health sector also leaves a lot to be desired. The merger could lead to the collapse of the private health sector.”
Mondi concluded that all Mboweni’s budget speech achieved was to try and maintain what the country already had. He strongly advised South Africans to live minimalistic lifestyles.
What are you going to do to manage your finances and keep afloat in the current economic conditions?
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