Cape Town – Finance Minister Tito Mboweni has promised growth in the economy and debt stabilisation in the next few years.
In his Budget speech this week, Mboweni highlighted a few areas that will ignite growth in the economy, saying the deficit will come down from 14% to 6.3% and the economy will grow by 3.3% this year.
The South African economy has not grown above 5% since 2008 when the global financial crisis. Since then then growth has averaged less than 2%.
When Covid-19 struck last March, most of the businesses closed and a number of jobs were shed. The economy declined by 7.2%, but Mboweni said there were green shoots.
He said the economy would grow by 3.3% because it has opened and some of the lost jobs have been regained.
The increase in tax collection has also seen the revenue service collecting R100 billion more than expected.
Mboweni said while they had expected that debt will reach 95% in the next few years, it will stabilise at 88.9%.
This would enable the state to reduce debt service costs, which are currently one of the largest expenditure items in the Budget.
Mboweni also said the government was in discussions with the unions over the public sector wage bill. He wants to cut the public sector wage bill by R300bn in the next three years.
This has been an ongoing issue between the state and government.
The National Treasury also defended its position of increasing social grants below the inflation rate.
President Cyril Ramaphosa weighed into the debate on Friday and argued that they were trying to strike a balancing act in the budget.
“We accept that we did not give an increase to social grants in the way we have done in the past. It’s a balancing act of the budget.
’’If you look at our budget, 56% of the budget is inclined to social spending,” said Ramaphosa.
He added that this was not an austerity budget. Ramaphosa said they were spending more on social services.
“Our debt servicing costs are rising at a faster rate than we are paying for education and health. In the outer years we are working towards a surplus.
’’We are going through a very difficult time. During this difficult time we have kept the social grants in a way that we don’t reduce them inordinately,” said Ramaphosa.
In the Budget review, the National Treasury will further allocate more bailouts for state-owned entities.
SAA has been given R4.3 billion, Eskom another bailout of R31.7bn and the Land Bank got an injection of R7bn.
Political Bureau