Tito’s tough job with high debt

BUD­GET: UR­GENT ECO­NOMIC RE­FORMS ARE RE­QUIRED

The Citizen (KZN) - - News - Rorisang Kgosana – ror­[email protected]­i­zen.co.za

Load shed­ding, coro­n­avirus ‘can play part’ in low growth.

The 2020 bud­get speech would be the tough­est since 1994 as Fi­nance Min­is­ter Tito Mboweni has to find means to re­duce the coun­try’s high debt lev­els, economists say.

Mboweni will on 26 Fe­bru­ary ta­ble the bud­get for the 2020-21 fi­nan­cial year in par­lia­ment.

But ur­gent eco­nomic re­forms are re­quired to grow the coun­try’s econ­omy to a level equal to that of pop­u­la­tion growth. This year would mark the sixth con­sec­u­tive year that the coun­try’s gross do­mes­tic prod­uct (GDP) de­clines due to the grow­ing pop­u­la­tion rate, Price­Wa­ter­house­C­oop­ers’ chief economist Lullu Kriegel said.

Speak­ing at a panel dis­cus­sion on the bud­get re­view yes­ter­day, ex­perts from the au­dit­ing firm pre­dict an­other low 0.6% GDP growth, as op­posed to the pre­dicted 1.2% growth by the South African Re­serve Bank (Sarb).

Fac­tors such as load shed­ding and the re­cent global coro­n­avirus could play a part.

“It would be un­be­liev­able if Na­tional Trea­sury comes with any­thing higher than the Re­serve Banks num­ber … In the 1.2% that Sarb put for­ward, they say they have fac­tored in the ef­fects of load shed­ding. We have also fac­tored that in when we came to the num­ber of 0.6%,” Kriegel said.

Due to the weak em­ploy­ment growth, only 20% of the pop­u­la­tion con­trib­uted to per­sonal in­come tax – the largest source of tax rev­enue.

Head of tax pol­icy Kyle Mandy ex­pected tax rev­enue to be be­tween R57 bil­lion and R65 bil­lion lower than the 2019 bud­get es­ti­mate – be­tween R4.5 bil­lion and R12.5 bil­lion lower than the re­vised es­ti­mate in the medium-term bud­get pol­icy state­ment (MTBPS).

“The sit­u­a­tion has de­te­ri­o­rated since the MTBPS. Based on the De­cem­ber bud­get, that num­ber could be higher and we are look­ing at a sig­nif­i­cant down­size risk. Rev­enue col­lec­tion has de­te­ri­o­rated over the last few months. It could po­ten­tially reach R20 bil­lion,” Mandy said.

For a more pos­i­tive fis­cal, Mboweni would need to pri­ori­tise re­duc­ing ex­pen­di­ture. This could be in the form of cut­ting the gov­ern­ment wage bill, Kriegel said.

“A strong mes­sage and ac­tion on curb­ing staffing costs is needed to in­crease con­fi­dence in the gov­ern­ment’s abil­ity to im­prove the fis­cal sit­u­a­tion.

“Mboweni should iden­tify ex­pen­di­ture that can drive eco­nomic growth. We will have to look at gov­ern­ment’s wage bill, which could be a very un­pop­u­lar de­ci­sion. I think he has the will but I am not sure he has the sup­port to do that,” she said.

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