JOHANNESBURG (Xinhua) – With South Africa’s debt levels continuing to rise, the supplementary budget Finance Minister Tito Mboweni delivered showed that the country was in a poor fiscal position, said an economist.
“The budget shows that South Africa is not in a good fiscal position, we have now reached the fiscal cliff,” head of School of Economic and Business Sciences at the University of the Witwatersrand Jannie Rossouw said.
He told Xinhua the government should focus on cutting spending in the coming years.
“In other words we are at a point where spending can’t just continue and we have heard that our deficit before borrowing would be at record levels, so over the next three years, the challenges will be to get our fiscal position back under control,” he said.
Finance Minister acknowledged the debt problem the country is faced with.
“We have accumulated far too much debt, this downturn will add more. This year, out of every rand we pay in tax, 21 cents goes to paying the interest on our past debts,” the minister said.
Mboweni said the country’s growth would shrink by more than seven per cent which would be the worst performance since the Great Depression, the budget will exceed R2 trillion for the first time ever.
With the economic growth set to struggle and revenue collection collapsing due to millions of jobs expected to be lost this year alone, Rossouw said tax increases must be expected.
“We can expect the possibility of tax increases next year even with a possibility of higher VAT next year. The government must stop helping state-owned entities because we just don’t have money for that. The fact that the public sector wage bill has been frozen is good,” Rossouw added.