Cut spending and reduce debt, economist urges government

Director of Governance and Public Services at Deloitte, Gaba Tabane, says government should make more effort to reduce debt, narrow the Public Sector Wage Bill and cut spending.

He says addressing the country’s ballooning debt which is crowding out social spending should be a top priority.

South Africa’s debt to Gross Domestic Product (GDP) currently sits at 69.9% or just over R4 trillion, while debt servicing costs are hovering around R300 billion.

Tabane says Godongwana should do something to reverse this worrying situation.

“Now the Minister goes to market and raises R11 billion with the World bank, but of course, there is a big boo-ha-ha in terms of why would you do that if you’re trying to address and arrest rising debt in the government fiscus.”

“Now he knows that it is part of the R6.5 trillion that they said they were going to raise in the market. However, the cost that goes with servicing this debt is quite enormous and eats into the budget that is supposed to deal with service delivery,” says Tabane.

The biggest challenge for the Finance Minister is to rein in public debt:

Meanwhile, Chief Economist at Standard Bank Goolam Ballim says the local economy is expected to grow by 2% in the current financial year.

He says next year’s growth will be supported by fixed investment and household spending.

Ballim says implementation upsides will rely on the processing of reforms that have been in the system for an extended period.

“Headline business and consumer confidence or what I colloquially refer to as structural sentiment remains weak. With last year’s July unrest adding further to long-standing concerns about political instability, there [is] also unrelenting electricity shortages which have been a blotch on sentiment. Fixed investment will moderate reasonably this year and more sprightly, overall growth will settle potentially near 2%,” says Ballim.

The video below looks at the expectations ahead of the Budget Speech: