DOWNGRADE
GAVIN KEETON: Beating the borrowing habit will be hard
'Much damage has already been done. The new finance minister has a huge responsibility not to stoke the fires further'
In its response to the downgrade of SA’s credit rating to "junk", the Treasury calls for reduced reliance on foreign and local borrowing. It notes that only 10% of government’s R2.2-trillion debt is denominated in foreign currency. The rest is rand-denominated. SA should, the Treasury suggests, reduce its dependency on foreign savings and rely less on debt to fund government spending to "secure SA’s fiscal sovereignty and economic independence". Similarly, Finance Minister Malusi Gigaba warns "it is essential that SA relies on her own resources, and that government lives within its means". This advice is sound, because the costs of foreign and local borrowing will rise significantly following the downgrade. However, it sidesteps how difficult weaning SA off its very high reliance on borrowing will be. For more than a decade, the country has consistently spent more than it produced. The resultant deficits with the rest of the world were funded by foreign capital inflows.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.