We are in big trouble, Tito’s bitter pills confirm

Economists say Finance Minister Tito Mboweni’s medium-term budget policy statement (MTBPS) paints a grim picture of a country that is in deep trouble, with increasing public spending and inability to collect revenue.

They said South Africa needs to find new ways of growing its economy, instead of concentrating on cutting expenditure as a way of dealing with the current crisis.

It needs to make tough decision such as retrenching public servants, particularly in administration, and not rely on natural attrition, which could backfire with the depletion of essential jobs.

In the process of retrenching, government must ensure that the lay-offs did not render service delivery useless, or cause the state to malfunction.

Chief economist at Economist.co.za, Mike Schussler, said Mboweni was caught between a rock and a hard place because the country’s situation was becoming more and more unsustainable and he was the man at the centre.

At the same time, he could not move because he had to satisfy the demands of ANC’s leftist political allies and the need to grow the economy.

“Markets and everybody say we are in trouble. The reaction by Moody’s on Friday might not be a downgrade rating for us but a change in the outlook, but the current situation – expenditure cuts and low growth – is going to have an impact on the everyday activities of the people.”

The fuel price hikes and other increases were impacting on consumers’ ability to spend and more and more people were unable to service debt.

“We are in deep trouble,” Schussler said.

Dr Thanti Mthanti, an economist based at the Wits School of Governance, noted that the key thrust of Mboweni’s MTBPS was on cutting public spending over the next three years.

“The efforts made in the last few years to cut the expenditure led to less economic growth. Last year, VAT was increased to 15% but still revenue collection was less. This shows there has been no growth in the economy,” Mthanti said.

He said the main issue that Mboweni and the rest of the executive had was to grow the economy through new ways beyond the historical agricultural and mineral exports.

– ericn@citizen.co.za

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