Government says low economic growth is hindering its ability to service its debt.
Finance Minister Enoch Godongwana says the state is faced with a multitude of challenges and is working hard to resolve these problems.
Godongwana says since he took office as finance minister, ratings agencies such as Moody’s have not downgraded the country.
He also noted that government needed to deal with basic challenges such as water and electricity supply.
The minister was speaking on the SABC News Current Affairs show the Watchdog.
South Africa has been battling rising national debt for years now.
With the onset of the COVID-19 pandemic in 2020, the country’s already ailing economy took yet another knock.
The effects manifested in massive job losses and pay cuts due to the strict lockdown restrictions.
In 2021, the country experienced social unrest, more erratic power supply, and inclement weather.
All of which have compounded the country’s economic growth prospects.
Finance Minister Enoch Godongwana says, “Debt on its own is not the problem, the issue is the capacity of the economy to service that debt. We are accumulating a lot of debt in an environment when the economy is not growing. What that means is the capacity of the economy to service this debt is becoming a challenge.”
The capture of organs of state which manifested in fraud and corruption have added to the debt challenges the country is facing.
Many of these institutions, such as Eskom have also had to be bailed out as they struggled to manage their affairs.
Over R300 billion has been spent bailing out the power utility in the last decade alone.
“Eskom has accumulated debt to the extent that its capacity to service that debt now is questionable. Therefore, there is a general agreement in my view when I look at the International Monetary Fund (IMF) report and the World Banks report is saying the challenges that are facing the government – is that we have to think how to manage that debt for Eskom. Not all of it, but some of it Eskom cannot afford,” adds Godongwana.
Youth unemployment remains one of the biggest challenges in South Africa.
Godongwana says government should look at the many instruments in the system to solve this issue.
The minister cites tax incentives as an example of the tools that can be utilised to fulfill this objective.
Below is the full interview with the minister: