Mboweni worries about country’s debt crisis

ALLOCATION: R500M SET ASIDE TO BE PART OF DISTRIBUTION CONSORTIUM

Finance Minister Tito Mboweni has warned that South Africa must find means to control its debt crisis urgently.

He 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, Mboweni 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 were 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 was not only due to the public sector wage bill, but was also attributable to the pattern of government expenditure.

In his October Medium-Term Budget Policy Statement, Mboweni proposed that salaries of public representatives be reduced by 30%, saying the country was in a “different and difficult” situation.

Reiterating this on Tuesday, he 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.”

Asked if Ramaphosa’s 2018 R1.2 trillion investment drive in five years was realistic post the pandemic, he said: “We should remain committed to those targets and work as hard as we can to achieve the targets...”

He anticipated 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.

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, he said steady progress had been made, with Treasury and the bank set to hold further talks. However, Mboweni was adamant the loan would not be at the behest of any policy considerations.

Country will be participating as one of the few emerging market nations, says minister.

The South African government is set to spend at least R5 billion on accessing Covid-19 vaccines and R500 million has already been allocated for the country to be part of an international vaccine distribution consortium, Finance Minister Tito Mboweni revealed on Tuesday.

He was speaking during a session of the Bloomberg Invest webinar on Africa, which included business, political and healthcare leaders from the continent.

“South Africa is in a very fortunate position in that we have been invited to participate in the consortium that is looking for this vaccine. Already a decision has been made that South Africa is paying R500 million to participate in the process of the production of the vaccine. [This] is so that we can be in the front line of those [countries] that can receive the vaccine,” he said.

“The minister of health [Zweli Mkhize] is very happy about it … it is very rare that any minister is happy with the minister of finance,” Mboweni joked.

“R500 million is in the pocket of the consortium. SA will be participating as one of the few emerging market countries,” he said.

He added that government is set to allocate a further R4.5 billion for Covid-19 vaccines. However, these funds will be part of the new budget process – likely the 2021 budget in February.

Mboweni did not specifically mention the international Covid-19 consortium that South Africa is participating in.

The initiative is the main World Health Organisation (WHO) partnership scheme for ensuring global vaccine access.

President Cyril Ramaphosa has previously mentioned South Africa’s intention to partner the

WHO in order to secure access to Covid-19 vaccines for not only the country, but also the continent.

Meanwhile, in his daily Covid-19 update on Tuesday night, Mkhize noted that there were 772 252 confirmed cases of the virus in SA. But there were only 34 725 active cases, with 716 444 recoveries. The health minister reported 2 493 new confirmed cases of the coronavirus and 115 deaths, taking the country’s official Covid-19 death toll to 21 083.