Finance Minister Tito Mboweni on Wednesday laid bare the damage wrought on South Africa’s already failing economy by COVID-19 and government’s efforts to combat the devastation.
The country is in the hole for debt of around R4 trillion.
The minister has likened the gap between income and expenditure as a gaping hippopotamus mouth and he said it should be closed.
“Our Herculean task is to close the mouth of the Hippopotamus! It is eating our children’s inheritance. We need to stop it now! Our Herculean task is to stabilise debt,” Mboweni said.
Briefing after his speech on Wednesday, Mboweni gave insight into the battle to regain control of the country’s finances amid runaway debt and now, the COVID-19 pandemic.
“The debt service costs which we thought would be around 65% of GDP in February, is now rising to over 80%. Now, these are the critical issues the supplementary budget must focus on so that all these other numbers have to assist in bringing back fiscal credibility,” he said.
“Without external support, these borrowings will almost entirely consume all of our annual domestic saving, leaving no scope for investment or borrowing by anyone else. For this reason, we need to access new sources of funding,” he added.
South Africa’s R4 trillion debt means that this year, 21 cents out of every rand we pay in tax will go towards paying interest on past debts.
Mboweni said that the widening gulf between income and spending had to be closed, or it would swallow up the inheritance of future generations.
He said that zero-based budgeting, where departments have to fight from scratch for every line item, would come into effect as the government moved to rein in debt and bring about more efficient spending.