Finance Minister Tito Mboweni today revealed the true horror of our nation’s precarious financial situation. We acknowledge his honesty that things are worse than imagined. We also welcome his tough talk on cutting the public wage bill and on the mismanagement of state-owned entities (SOEs).
But the Minister’s number one priority in this speech was to present a credible plan to control national debt and rein in the deficit. The fact is that he did not do this. For all the tough talk, the Minister’s bark was worse than his bite. The spending cuts he did announce – roughly R50 billion over the next two years – will not be nearly enough to slow down the ballooning of national debt, and will not be enough to restore credibility with ratings agencies.
Earlier this week the DA made a credible proposal to cut the wage bill by R168 billion in three years, while protecting frontline service delivery staff like teachers and nurses. Today the Minister echoed that call, with tough talk on the wage bill, but didn’t do anything about it. All of the cuts he announced will be applied to “non-compensation” spending, with no cuts to the R630 billion wage bill. Effectively, he procrastinated again on the tough action needed to turn our finances around.
Far from reining in the deficit, the Minister’s proposals see the deficit expanding to an alarming 5.9% this year, and blowing out completely to 6.5% next year.
Far from getting national debt under control, debt will skyrocket by a truly staggering R1.5 trillion in the next three years alone. By then we will be spending R299 billion a year just on interest payments. This will be more than we spend on educating our children (R262 billion), more than we spend on healthcare (R222 billion), nearly triple what we spend on police (R104 billion), and more than we spend on social grants (R206.8 billion)
National debt has exploded from 54% of GDP in 2017/18, to a projected 71.3% of GDP in 2022.
And far from ending support for zombie SOEs, the detail of today’s proposals reveal another R33 billion for Eskom and a R9 billion debt write off for SAA. While the basic services on which the public rely are being cut, more money is being spent on failing SOEs. This is an indefensible choice.
Further procrastination will have terrible consequences for South Africans, particularly for the poor, as service spending is squeezed out by debt and salaries. We urge the Minister to implement the DA’s proposal to cut the wage bill.