As President Cyril Ramaphosa prepares to deliver the State of the Nation Address (SONA), analysts say he should be more focused on reducing the country’s R4 trillion debt.
National Treasury projects that the national debt will increase to over 80% of Gross Domestic Product (GDP) this year and will only stabilise at around 95% by 2025.
Analysts say the only way to slow down the rapid growth in debt is to spend less on failing State-Owned Entities, to reduce the public service wage budget, and arrest corruption.
They expect President Cyril Ramaphosa to highlight austerity measures that will be adopted by the government to achieve sound fiscal consolidation.
Chief Economist at Efficient Group Dawie Roodt says although Ramaphosa is expected to announce a reduction in government spending, he will leave the details of the government’s budget for Finance Minister Tito Mboweni’s Budget address later this month.
“That fiscal limitations, the president is going to refer to and obviously the reason he’s going say that is because there is huge pressure on the fiscus to spend on everything and we’ve reached the line, we can’t keep spending money like this.”
The country’s debt situation is exacerbated by the government’s falling revenue targets and a high public service wage bill.
Last year the government insisted that public servants will face a salary freeze to help restore public finances:
A lecture at the Wits School of Economics and Business Science, Lumkile Mondi says the Reserve Bank should play a bigger role in helping to manage the country’s debt crisis.
“It requires an expansionary fiscal model where government leans on the central bank to assist it by borrowing more of government debt and therefore putting liquidity to enable the government to really invest hugely on failing infrastructure.”
Mondi says a tax increase may prompt more people to move their money off-shore due to the public’s lack of faith in the government, and its ability to manage public resources.
“Many of us believe that another tax increase to try and mobilise funding for comrades to share the spoils as they’ve done recently on the PPE procurement. So really the increased taxes will push those individuals who’ve still got a lot of savings in South Africa to move them off-shore.”
President Cyril Ramaphosa is expected to deliver the State of the Nation Address on Thursday evening from 7 o’clock.