Finance Minister Nhlanhla Nene presented his first mid-term budget policy statement in Parliament today, giving a sombre assessment of the current state of South Africa’s economy.
Nene’s biggest challenge today was to explain to South Africans how he plans to keep government spending under control and pay down the country’s rising debt.
Speaking on the Afternoon Drive with Xolani Gwala, Chief Economist at FNB, Sizwe Nxasandla says it’s good that there were no shocks in the Minister’s presentation, adding that the government’s consistency over the last two years is reassuring.
The government is essentially telling us that they helped the economy via strong spending since the financial crisis but that the cost of that has been rising budget deficits and a rise in government debt to levels that are now reaching unsustainability. They started acting against that in terms of reducing spending about two years ago, and they were hoping that the economy – by improving – would support them. But the economy has disappointed.— Chief Economist at FNB, Sizwe Nxasana
The Minister announced that Treasury would reduce government spending by approximately R25 billion over the next two years, he also signaled that taxes would be increased so that tax revenue over the next two years amounts to approximately R27 billion.
One of the biggest talking points in the weeks leading up to the Mid-term Budget Speech has been the issue of the public sector wage bill, with civil servants asking for a 15 percent increase which is more than double the rate of inflation. Commenting on the wage bill, Nxasandla says
In their attempts to try and contain spending, the government wage bill presents the biggest upside risk to them meeting their downwardly revised expenditure budget.— Chief Economist at FNB, Sizwe Nxasana
You can listen to Xolani's full conversation with Sizwe Nxasandla by clicking the image below: