Economist warns of dire times ahead

SOUTH Africa’s public finances were so dire that each cent the government spent pushed the country deeper into the red, and credit downgrades became a real possibility, an economist has warned.

At the weekend it was reported that the state was considering a R59 million bailout for distressed entities including the SA National Road Agency, the SA Post Office, SAA, the SABC and the Trans-Caledon Tunnel Authority.

Economist Dawie Roodt said state finances were in a terrible state.

“The chances are we are to be downgraded at any event. Things are absolutely horrible; the government salary bill is R30 billion more than originally expected, then you have these bailouts, and there could be additional spending on the National Financial Student Aid Scheme.”

Roodt said state revenue was already under pressure and the country faced the possibility of a recession.

“Everything is snowballing and we are all going to pay the price because of this spendthrift government,” he said.

Roodt made the comments after the Sunday Times newspaper reported that a rescue plan for distressed entities formed part of the discussion at the cabinet lekgotla last week.

It said three entities were tipped for a cash injection and two others for government guarantees.

Roodt said there was still a way out of the country’s economic woes.

“Unfortunately, our politicians simply don’t have the political will to do this, but there is a way out. We have to close down a lot of these state-owned entities, cut back on the number of civil servants, and to rationalise and ensure we stop the rent-seeking by politicians and civil servants,” he said. “We have to simply run the state much leaner and much more efficiently and, of course, get rid of corruption.

“I’m afraid those things are difficult to do. I just don’t think our politicians have the backbone to make those sorts of difficult decisions,” Roodt said.

He added that Finance Minister Nhlanhla Nene was likely to report in the upcoming adjustment Budget that tax collections would be lower than expected and that the fiscal deficit was going to be much worse.

“After the mini-Budget there is a good possibility that we are going to see some sort of a downgrade by rating agencies. Things look quite bad for South Africa at the moment.”