Way to turn tide against SA’s debt

Government needs to urgently address its expenditure patterns if it is to turn the tide against unsustainable debt levels, says the National Treasury.

This was the shared sentiment by Deputy Finance Minister David Masondo and department director-general Dondo Mogajane, during the opening session of the two-day Savings@Work: Government Spending Reviews Conference yesterday.

The inaugural conference is hosted by National Treasury and its agency, the Government Technical Advisory Centre.

Mogajane said government needed to scrutinise its debt, saying it was currently spending R270 billion a year to service its liabilities.

“Our debt is too high and we are burdening future generations with the debt that we currently accumulate,” he said.

The nonperforming economy and low tax collection have largely been cited as contributing factors to the accumulation.

“We cannot continue to indefinitely borrow because future generations will be impacted. It is something that we need to focus on,” he said, adding that “something” needed to be done on expenditure to achieve this.

While National Treasury had, over the years, undertaken expenditure review exercises, he said these also needed to inform government as which favourable frameworks were needed.

The tide of debt would not turn into growth and prosperity until it was redirected, he said.

Currently, he added, government expenditure was largely on programmes that may not produce the goods needed to improve or expand the production sectors of the economy.

“We are spending on consumption – we need to change that. We’ve been doing that in the last few years but we need to [change] more,” said Mogajane.

In turn, this would lead to increases in production sectors of the economy and a reduction in consumption spending.

As it stood, he said, the state was spending “a lot” on its compensation budget. In this regard, government was currently engaging union needs but Mogajane warned that the state may not meet “required standards”.

Government, he said, needed to consider its options on expenditure. These included social spending and decreasing the compensation budget, both of which was no desirable.

His sentiments were echoed by Masondo.

“This is a problem that emerged before the Covid-19 pandemic and it has its roots in the large, structural gap that we have between tax revenues… and… government’s spending commitments,” said Masondo.

These, however, have since been exacerbated by the pandemic, he said.