Finance Minister Tito Mboweni has hopes amid the current downturn in the economy.
According to supporting documentation made available by the national treasury in addition to the medium-term budgetary framework (MTBPS), the government’s medium-term priorities are to put economic recovery and fiscal consolidation first.
Recovery after the Covid-19 pandemic and the resulting isolation period will be gradual and uneven, the Treasury expects – and there will be setbacks.
In South Africa, the pandemic and the containment period led to an economic contraction of 7.8%. Still, the Treasury expects it to translate into economic growth of 3.3% next year – albeit from the lower new base, which means less than half of the economic contraction that took place this year will be recovered in the following year.
The contraction in tax revenue for this year, compared to the expected figure as released in February, is R312.8 million.
The consolidated budget deficit increased from 6.4% of GDP to 15.7% of GDP, although the real GDP contraction must be borne in mind before cataclysmic conclusions are drawn.
Debt and interest on debt will henceforth swallow up 21% of budget revenue. The real contraction of the economy is calculated at 7.2%.
ŉ Another major source of concern is public service salaries. The Treasury says that civil servants’ salaries consistently rise more than inflation and that civil servants are now better compensated than those in the private sector.
As the domestic economy recovers, GDP growth is expected to average 2.1% per year over the next three years, with economic output and production only reaching the levels maintained in 2023-’24, which will be maintained by the start of the recession period.
Mboweni said the national treasury’s figures show that the economy will shrink by 7.8% this year and that it is especially job losses that are driving the country bare, but that people should not give up.
“The government is currently borrowing at a rate of R2.1 billion a day, and it is not sustainable,” Mboweni said, referring to the situation in the words of Samuel Taylor Coleridge in “The Rime of the Ancient Mariner” with a painted ship compare on a painted sea.