“Politically contentious ” reform critical to avoid full blown sovereign debt crisis, says Minerals Council

Tito Mboweni, South Africa's finance minister.

THE Minerals Council South Africa supported finance minister Tito Mboweni’s fiscal consolidation plans, detailed in the medium-term budget policy statement (MTBPS) on Thursday, but it said Government must speed reform in order to avoid a full blown sovereign debt crisis.

It called upon the South African government to enact “… politically contentious reforms” with the process of discussion in NEDLAC (The National Economic Development and Labour Council) expedited. “The MTBPS is a step in the right direction, but the further structural and institutional reforms are now vital and urgent,” said the council.

Mboweni said Government’s wage bill would be cut R310.6bn over four years, including the R36.5bn cut for 2020. Major cuts are planned for labour-intensive sectors such as learning and culture (R114bn over four years), and police and security (R78.5bn). Public sector wages would grow only 1.8% in 2020 and average annual growth in the bill would be kept to 0.8% between 2021/22 and 2023/24.

Total public sector debt has ballooned from 24% of GDP in 2008 to 81% this year, with interest on public debt the fastest growing component of government spending, said the Minerals Council.

“This MTBPS was going to be a very difficult juggling act between conflicting demands and interests while at the same time starting the urgently required fiscal consolidation process,” the Minerals Council said. “And the crisis we are in cannot be blamed on the Covid-19 pandemic. The fact is that the South African government has been living beyond its means for over a decade.”