Finance minister Malusi Gigaba. Picture: ESA ALEXANDER
Finance minister Malusi Gigaba. Picture: ESA ALEXANDER

If steps were not taken in the 2018-19 budget to stabilise debt, SA would have had to go cap in hand to multilateral institutions — such as the International Monetary Fund (IMF) — to seek financial assistance, Finance Minister Malusi Gigaba said on Thursday.

The minister briefed members of Parliament’s select and standing committees on appropriations and finance on the "tough" budget proposals he tabled on Wednesday.

The budget sees a consolidation of debt and a reduction in the budget deficit over the next three years. It also proposed a one percentage point increase in the rate of VAT, which together with other tax measures will raise R36bn in additional revenue.

While tough decisions had been necessary, these decisions had been taken by the government on its own terms as a sovereign nation, Gigaba said.

"Had we decided not to stabilise the debt whilst we have these needs that we have to fulfil, obviously one of the sacrifices we would have had to make is our own sovereignty in terms of having to go to multilateral institutions to seek assistance to be able to implement our programmes.

"They would then decide not only that we need to tighten our belt but also by how much we need to do so. They would decide what type of diet they must put us [on] … and how aggressive that diet should be. They would make all the major decisions that ultimately would affect our sovereignty as a country,

"We have made a choice to continue implementing our programmes ourselves in a manner we choose. No matter how difficult the immediate choices are, we know the future therefore will be much better."

Gigaba said the tough budget raised the hope that debt consolidation measures and the structural reforms announced by President Cyril Ramaphosa would ensure that the economy would grow.

These reforms related to mining, telecommunications, state-owned enterprises, the financial sector and procurement. They would boost business and consumer confidence, which would have a positive effect on the economy and generate more tax revenue.