The Minister of Finance, Malusi Gigaba’s, “maiden” medium-term budget policy statement exposes the full horror of President Jacob Zuma’s catastrophic management of the economy in South Africa.
The minister’s medium-term budget policy statement reveals a full-scale budget “blow out” with:
** a massive revenue shortfall of R50. 8 billion, which is the largest revenue shortfall since the global financial crisis;
** a breach of the expenditure ceiling by R3.9 billion, which was in part caused by the R10 billion bailout of South African Airways, and which had to be offset mainly by using the contingency reserve (R6 billion), projected underspending (R3 billion), and selling the family silver, in the form of shares in Telkom shares (R3.9 billion); and
** a “blow out” in the budget deficit by R54 billion to R203 billion, or 4.3% of GDP in 2017/18.
The budget deficit “blow out” results in an increase in national debt of R67.9 billion to R2.3 trillion, or 54.2% of GDP and an increase in debt service costs of R900 million to R163.3 billion, in 2017/18.
The budget “blow out” ricochet’s through the medium term pushing the national debt to R3.4 trillion, or 59.7% of GDP, in 2020/21.
The full horror of the medium-term budget policy statement and the failure to stabilize national debt is that, in three financial years’ time, we will be spending:
** R33.8 billion more on debt service costs than we will spend on health in this financial year;
** R129.7 billion more on debt service costs than we will spend on police this financial year; and
** R44.7 billion more on debt service costs that we will spend on social protection this financial year.
Worse, any prospect of the recovery now rests with a mystery “presidential committee” under President Jacob Zuma, who is “ground zero” of the meltdown in the economy in South Africa.
That is why we have proposed a package of structural reforms to boost economic growth and job creation, a Comprehensive Spending Review to identify savings, with a view to cutting expenditure over the medium term, and placing the national airline in business rescue with a view to stabilizing and then privatizing South African Airways.