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Budget confirms alarming state of public finances – Solidarity

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The trade union Solidarity today said the medium-term budget framework presented by Finance Minister Nhlanhla Nene, once again emphasised the alarming state of South Africa’s state finances.
According to the mini-budget, state spending amounted to a hefty R1,25 trillion , while tax revenue of only R1,1 trillion could be expected. That leaves a deficit of R176,1 billion on the main budget. Consequently, large deficits are expected throughout the entire medium-term period, signifying a further accumulation of national debt.
The total gross national debt, which has increased firmly since the 2008-’09-financial year, currently amounts to R2 trillion, and this figure will increase to R2,6 trillion in 2018-’19. Collectively, the national government’s gross debt represents 49% of the gross domestic product. This does not include the debt of other state-owned enterprises such as Sanral, SAA and Eskom.
Along with the accumulation of national debt, substantial nominal increases in debt service costs of approximately R128 billion in 2015-’16 to R175 billion in 2018-’19 are expected, representing a growth of 10,9% per annum on a compounded basis.
According to Gerhard van Onselen, economics researcher at the Solidarity Research Institute, debt servicing costs represent 6,4% of tax revenue, which are still relatively low, however the cost of future debt could be even higher if interest rates return to the average higher rates of the past.
According to Van Onselen, the mini-budget not only confirms the commitment to transfer payments, but in reality little is being done to stop fruitless and even irregular expenditure. “In addition, large portions of government spending are still allocated to a redistribution budget which, in reality, deprives the economy of much-needed economic growth,” Van Onselen said.