SA debt trap beckons
Unless SA takes urgent action to accelerate growth and reform state enterprises, the risks building in the fiscal system could prove overwhelming
At the very end of finance minister Malusi Gigaba’s medium-term budget is an eight-page annexure carrying the big, bold headline "Fiscal Risk Statement" in red ink. Most members of the media (and probably most ministers) don’t get to this part of the budget, though it is the most terrifying. It should ideally be placed at the front of the budget book and copies made for every politician. Its message is clear: if government fails to get a grip on free-wheeling state-owned enterprises (SOEs) and is unable to restore growth or curtail the risks threatening the fiscus, public finances will deteriorate rapidly, pushing SA ever closer to a debt trap. In even simpler terms, what it means is that unless economic growth rebounds to 3%, SA will not be able to sustain the social policies it already has, let alone afford new ones.Given treasury’s forecast that growth will average only 1.7% over the next three years, this means government’s new policy proposals — including the implementation of ...
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