Prinesha Naidoo and S’thembile Cele
(Bloomberg) —
South African Finance Minister Tito Mboweni affirmed his commitment to reining in debt amid concerns that the coronavirus pandemic and a week of deadly riots will further erode the state’s already shaky finances.
“We are not going to go to a sovereign debt crisis for now, at least not under my watch,” despite opposition to spending constraints, Mboweni said in an interview on Wednesday. “There is no such thing as a popular minister of finance — it doesn’t exist, it’s a contradiction in terms. You have to be unpopular.”
Public finances rapidly deteriorated over the past decade as loss-making state-owned companies including Eskom Holdings SOC Ltd. and South African Airways received a series of bailouts, and the government repeatedly failed to contain its wage bill or tackle graft.
The Treasury in February predicted that debt will peak at 88.9% of gross domestic product in the 2026 fiscal year and it set a target of a primary budget surplus of 0.1% of GDP a year earlier. The International Monetary Fund cautioned this month that deviations from the framework could put debt on an explosive path.
“It is very important that the current government sticks to the fiscal framework and sticks to the trajectory that we have put in place to bring the debt-to-GDP ratio down,” Mboweni said. “Based on what I see, as of today, we are still on course to try and control that.”
The minister’s comments came after National Treasury officials outlined how a 38.9 billion rand ($2.6 billion) relief package for businesses and individuals affected by the worst civil unrest since the end of White-minority rule in 1994 will be funded. About 330 people died and thousands of businesses were shuttered after protests against the jailing of former President Jacob Zuma on contempt of court charges morphed into a rioting and looting spree.
Most of the relief will be dispensed through new budgetary allocations funded with a tax windfall from mining companies, which are reporting soaring revenue as commodity prices surge, officials said. The Treasury is due to publish revenue estimates for the first quarter of the fiscal year on July 30.
The new measures come a year after the Treasury reprioritized the budget to help fund a 500 billion-rand stimulus package to help shore up the economy against the impact of lockdowns aimed at curbing the spread of the Covid-19 pandemic.
The biggest component of the aid — the reintroduction of monthly welfare grants for the poor that will cost the state 27 billion rand — is a temporary measure, Mboweni said. He urged the government to focus on creating jobs in a nation where almost a third of the workforce is unemployed.
It is also important for political parties to “cross the Rubicon and embrace private enterprises” that can create jobs and help to move the economy forward, he said. Africa’s most industrialized economy suffered its biggest contraction in a century in 2020 and the unemployment rate reached a record 32.6% in the first quarter.
While Mboweni has frequently expressed the need for young politicians to take over key posts, he said he’ll remain in his position as long as President Cyril Ramaphosa needs him to.
(Updates with comments on private enterprises, GDP and unemployment data in penultimate paragraph)
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