Debate on the “SA’s Great Unravelling” with Minister Maynier

We are in deep economic trouble in South Africa.

We have:

• stagnant economic growth, with the economy forecast to grow at an average of about 1.5% over the medium term in South Africa.

We have:

• declining per capita incomes, as the population growth rate exceeds the economic growth rate, which means the poor are getting poorer.

We have:

• staggering levels unemployment, with 9.9 million people who do not have jobs, or who have given up looking for jobs, in South Africa.

We have:

• zombie state-owned enterprises, such as South African Airways, consuming billions of rands in bailouts.

We have:

• eyewatering national debt levels, with national debt that will now almost certainly exceed an estimated R3.4 trillion, or 59% of GDP, in 2021/22 in South Africa.

We have:

• the biggest threat to the economy, consuming a R59 billion in bailouts, which is, of course, Eskom.

The fact is that Eskom is in a “death spiral” and has a staggering debt mountain of R441 billion, which will cost R69 billion in debt service costs, which is about R1 billion more than the provincial budget this year in the Western Cape.

We have:

• the rating agencies circling us like sharks, with Moody’s Investor Services about to push the “red button” and downgrade our sovereign credit rating to “junk status” in South Africa.

Which will result in a giant sucking sound as capital moves out of South Africa.

What we need is an economic growth and recovery plan in South Africa.

However, we have land expropriation without compensation; we have nationalization of the reserve bank; and we have prescribed assets in South Africa.

We had Enoch Godongwana, the governing parties “Tsar” on the economy saying this weekend that, “Why should you go to the IMF and the World Bank and go and raise money when we have sufficient saving in the economy, which you can borrow, probably far cheaper, and probably with little exchange rate risk?

Which suggests that the governing party are actually thinking of “raiding” public and private pension fund savings to bailout national government and zombie state owned enterprises in South Africa.

Worse, we have state banks; we have sovereign wealth funds; we have debt relief; and we have national health insurance, all seemingly, dreamt up at the how-to-wreck-your-economy, Hugo Chavez School of Economics.

We have worked hard to create an enabling environment for the private sector, and the markets, to drive economic growth and job creation, and as a result have the lowest unemployment rate in the South Africa.

However, the full horror of the national government’s mismanagement of the economy, mismanagement of our public finances and mismanagement of our state-owned enterprises, will have major implications for the economy in the form of deep budget cuts, which risks severely compromising service delivery the Western Cape.

We now face budget cuts of 5 per cent, or R2.8 billion, in 2020/21, 6 percent, or R3.5 billion in 2021/22 and 7%, or R4.3 billion, in 2022/23.

We are committed to fighting these budget cuts tooth-and-nail and for that reason I have already written to the Minister of Finance, Tito Mboweni, informing him that the budget cuts are unaffordable and unrealistic and compromise frontline service delivery in the Western Cape.

We have to face the fact that that the economic crisis, or “SA’s Great Unravelling”, is not caused by some kind of “third force”, but by national government’s mismanagement of our economy, mismanagement of our public finances, and mismanagement of our state-owned enterprises in South Africa.

The “root cause” of the problem is that we have a national government that is pro-growth and anti-business at the same time in South Africa.

We have, to put it simply, a national government that loves milk but hates cows in South Africa.

The article in the Financial Mail, on “SA’s Great Unravelling”, ends with a question: “Can the economy be saved?”. And the answer to the question is: “yes”. But, not as long as the governing party is governing South Africa.

Because, the fact is that it is the politics that is killing the economics in South Africa.

Media Enquiries: 
Francine Higham
Spokesperson for the Provincial Minister of Finance and Economic Opportunities
(Responsible for the Provincial Treasury and the Department of Economic Development and Tourism)
Tel: 021 483 4327
Cell: 071 087 5150
Email: francine.higham@westerncape.gov.za