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SA faces debt trap warns Mboweni, departmental budget cuts to fund SAA bailout

28 October 2020 7:08 PM
Tags:
South African Airways
National Treasury
Tito Mboweni
SAA bailout
The Money Show
Bruce Whitfield
dondo mogajane
National Debt
Busisiwe Radebe
MTBPS
Economic Recovery Plan
2020 medium term budget policy statement
public sector wage freeze

Is National Treasury not robbing Peter to pay Paul? Bruce Whitfield gets reaction to the Medium-Term Budget Policy Statement.

Finance Minister Tito Mboweni has warned that the country is heading for a debt crisis if it doesn't change its spending habits.

He delivered the crucial 2020 Medium-Term Budget Policy Statement (MTBPS) on Wednesday.

FILE: Finance Minister Tito Mboweni delivers his Medium-Term Budget Policy Speech in Parliament on 28 October 2020 in Cape Town. Picture: GCIS.

The Treasury puts its estimate of economic contraction for 2020 at 7.8 per cent, recovering to real GDP growth of 3.3 per cent in 2021.

Cutting the public wage bill is one of the main fiscal measures Mboweni outlined to narrow the budget deficit and stabilise debt over the next five years.

"Failure to address the deterioration in the fiscal position could lead to a sovereign debt default, which would result in a reversal of many gains of the democratic era.”

RELATED: We’ll find the money (R10.5bn)! We won’t allow SAA to die – Public Enterprises

At the same time government will find the R10.5 billion it promised to help fund the bailout of South African Airways (SAA) through departmental budget cuts.

Nedbank economist Busisiwe Radebe says the emphasis should rather be on generating revenue.

The thing that makes my eyes go big is how are we going to get the wage bill that low?

Busisiwe Radebe, Economist - Nedbank

We're in trouble... You need more revenues and we're not actually talking about that! We're talking about trying to battle this thing and trying to get the wage bill down. No - let's look at revenue as a percentage of GDP, that's what we should be talking about.

Busisiwe Radebe, Economist - Nedbank

We can't be stealing money from these departments to actually give to SAA - we need to increase revenues...

Busisiwe Radebe, Economist - Nedbank

Is National Treasury not robbing Peter to pay Paul in the case of SAA?

Bruce Whitfield puts the question to Treasury Director General, Dondo Mogajane.

No! It's not denting the credibility of the Treasury. The Treasury works within the collective of the whole of government and Cabinet...

Dondo Mogajane, Director General - National Treasury

We said we're not going to borrow any more cents to fund SAA. The money will come from the framework allocated in the Supplementary and February budget, and that's what we did! As you correctly said, we had to borrow from Peter to pay Paul in the system.

Dondo Mogajane, Director General - National Treasury

So we reduced a number of budgets to get to the R10.5 billion... within the fiscal framework presented at the Supplementary Budget.

Dondo Mogajane, Director General - National Treasury

South African Revenue Service Commissioner Edward Kieswitter also comments on the plan to reduce the public wage bill and what Sars is hoping for in terms of supplementary funding.

Listen to the reactions to Mboweni's 'mini-budget' below:

Watch Mboweni delivering the MTBPS:




28 October 2020 7:08 PM
Tags:
South African Airways
National Treasury
Tito Mboweni
SAA bailout
The Money Show
Bruce Whitfield
dondo mogajane
National Debt
Busisiwe Radebe
MTBPS
Economic Recovery Plan
2020 medium term budget policy statement
public sector wage freeze

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