Public Debt now the tightening Noose around the Country's Neck
In a strong rebuke of government’s dogged refusal to rein in public spending, especially on a civil service bill that has ballooned over the years, the Centre for Development Enterprise (CDE) has released a report that details exactly how bad it is. In a document called “Running out of Road, South Africa’s public finances and what is to be done”, the CDE states how public sector debt went from R210 billion in 1992, R900 billion in 2009 to the current R3 trillion – a noose around the country’s neck which sucks up 60% of GDP.
In its assessment of the assessment, the CDE could scarcely be clearer about how public debt weighs on the economy: “South Africa’s fiscal crisis is a result of rapidly rising public spending in an era of slow economic growth.” In addition, it states, “the accumulation of debt is now slowing economic growth”. Matching the clarity of its reasoning is the scathing castigation that “Running out of Road” directs at the government, whose response to the crisis has been inadequate. “It has not reined in spending sufficiently, and the increase in tax rates has not resulted in higher revenues because of the crisis at Sars and slowing growth.”
Coming as it does on the heels of finance minister Tito Mboweni’s economic restructuring document which made headlines yesterday, “Running out of Road” echoes tax collecting commissioner Edward Kieswetter’s sentiments expressed earlier this week at the Tax Indaba that the country was finding itself in a revenue rut. And yet Eskom, for one, is gobbling up money like a giant bloated slug with no end in sight to successfully addressing its debt burden of R450 billion.
Says the CDE: “Government needs to tackle rising public spending. It also needs to ensure that the SOCs, and the industries in which they operate, are restructured.” Without economic growth and determined, inflexible belt-tightening, a move that will put a blow-torch under the hot seat in which President Cyril Ramaphosa finds himself, “SA will be unable to stabilise public debt”.