Finance Minister Tito Mboweni has warned that South Africa must find means to control its debt crisis urgently.
The Minister made the declaration during a virtual discussion of the Bloomberg Capital Markets Focus: South Africa on Tuesday.
“I’m very worried about this because on the current trajectory, and if we do not act on the active scenario to contain the debt, and most fundamentally, to grow the economy so that we can get more revenue, so that the denominator can do much better and the debt to (GDP) can be contained (sic),” he said.
To stabilise the country’s precarious footing, the Minister said structural reforms are “absolutely fundamental”.
“We have to avoid a situation where the debt to GPD ratio comes to over 100%. That would… mean we would be facing a sovereign debt crisis… .”
Mboweni said the bulk of government bonds is held by domestic banks, and in the event of a sovereign debt crisis, that would result in a banking crisis.
The Minister said the debt crisis is not only due to the public sector wage bill, but it is also attributable to the pattern of government expenditure.
In his October Medium Term Budget Policy Statement (MTBPS), the Minister proposed that public representative salaries be reduced by 30%, saying the country is now in a “different and difficult” situation.
Reiterating this on Tuesday, the Minister said it was a consideration that he has put before President Cyril Ramaphosa and Parliament.
“If all the people involved understand the severity of the situation, I’m sure they should accept this.”
Turning attention to the country’s economic prospects, Mboweni said government should mobilise private enterprise to invest in the economy post lockdown.
“That mobilisation is happening in the economic reconstruction recovery programme. Fundamentally, the confidence of private enterprise is key and the President is on course to generate that,” said the Minister.
Asked if the President’s 2018 R1.2 trillion investment drive in five years was realistic post the COVID-19 pandemic, the Minister said: “We should remain committed to those targets and work as hard as we can to achieve the targets…”
Over the next three years, Mboweni said he anticipates that the country’s economy would grow by 3% in 2021, 1.7% in 2022, and 1.5% the following year.
“Our job is to continue to aim for higher growth rates, and engender sufficient confidence among economic agents, producers and consumers in order to ramp up the growth rate much higher.
“It has to remain our objective. We are the leadership and leadership should lead with confidence going forward and have ambition, and that’s what we are doing.”
Treasury, working with the Presidency, other government departments and the private sector, is embarking on a programme of action aimed at “getting things moving”.
“Private enterprise is very important. We must not be oblivious to that fact. If we mobilise private enterprise, we engender sufficient public confidence. These things are achievable.
“Already we are beginning to see green shoots in mining and manufacturing. We see production being ramped up, which is very good…” Mboweni said.
Regarding progress on the much-vaunted World Bank loan, the Minister said steady progress has been made in that regard, with the Treasury and the bank set to hold further talks. However, Mboweni was adamant that the loan would not be at the behest of any policy considerations.
“I think we are edging closer to a common understanding. The World Bank country representative in South Africa has requested a meeting with me to discuss their approach. What I’ve resisted is any attempt that the World Bank imposes policy considerations or conditionalities on us,” said Mboweni. – SAnews.gov.za