Mr Mboweni likened our growing debt to a Hippo, with an open mouth, asking for more! For every R1 tax collected, 21 cents pay interest.
Only if debt is reduced will the government be able to invest in growth. Hippos can’t swim or float so reducing debt must be Government’s number one priority to keep South Africa’s economy buoyant.
Consolidated budget deficit is expected to reach 15.7% of GDP for 2020/2021, an upward revision from February’s estimate of 6.8% of GDP. Government’s debt levels will rise to 81.8% of GDP, or R 4 Trillion by the end of this fiscal with the aim of stabilising debt at 87.4% of GDP in 2023/24. Treasury expects growth to contract 7.2%, the largest contraction in nearly 90 years. The government intends to borrow $7bn (R121bn) from international finance institutions. True to the Mbowenian hippo metaphor, South Africa will be sweating blood for the next few years.
To quote the minister, “Eventually the gains of the democratic era would be lost. The wide gate opens to a path of bankruptcy. A sovereign debt crisis is when a country can no longer pay back the interest or principal on its borrowings. We are still some way from that. But if we do not act now, we will shortly get there.”
“We have come to the crossroads and have to confront the problems head-on.” the minister continued. Hippos are considered one of the most aggressive and dangerous animals in Africa. We will need a strong, decisive plan to guide our economy in a different direction.
President Cyril Ramaphosa confirmed the deep hole in the public purse, talking of a tax collection shortfall of R300-billion during his parliamentary Q&A. Hippos’ closest relatives are whales. Let’s all hope and pray the plan is not to stop feeding the Hippos and start with Whales!
Hippos yawn, not because they are lazy or about to fall asleep or even asking for food. It is a sign of aggression and a clear warning. Health will get R21.5-billion for Covid-19 spending, and a further R12.6-billion will go to services at the frontline of the Covid-19 response. Provinces get another R5-billion for catch-up programmes, while another R19.6-billion will go to the Presidential Youth Employment Intervention, who, incidentally, have already been allocated R6.1-billion earlier this year. The Land Bank receives R3-billion because they are too important to fail.
Perhaps, SAA is a great example of what happens if we continue feeding the hippo, even when common sense dictates otherwise? Not only is COVID 19 leaving a distinctive impact on history, it has also highlighted the serious state of our economy, prior to the pandemic. We are indeed at a crossroad.