- President Cyril Ramaphosa has weighed in on Finance Minister Tito Mboweni's Budget Speech
- The president says that South Africa is spreading itself thin and spending more than its earning
- If the situation isn't turned around, Ramaphosa says the difficult times will continue
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President Cyril Ramaphosa says that the Budget Speech presented by Finance Minister Tito Mboweni presents a 'sobering assessment' of the state of the economy.
In his weekly letter to the public, Ramaphosa made it clear that the situation needs prompt action:
"The figures make it plain that unless we act now to turn things around, there will be even more difficult times ahead. Put simply, we are spending far more than we are earning."
Ramaphosa explains that this has made for a vicious cycle that he dubs 'precarious and unsustainable':
"As a result, we are borrowing more and more, and the cost of servicing that debt is rising. In fact, debt service costs are now the fastest-growing area of expenditure. We spend more on debt repayments than we do on health; only education and social development get more."
READ ALSO: Explainer: Economist weighs in on Tito Mboweni's Budget Speech
The president detailed how South Africa found itself in this dire financial situation:
"There are several reasons for the position we’re now in. Our economy has not grown much over the last decade, mainly due to the 2008 global financial crisis and a decline in demand for the minerals that we export. As a result, revenue collection has been weak and we have had to borrow more to sustain spending on development, infrastructure and wages. At the same time, state capture and corruption has affected governance, operational effectiveness and financial sustainability at several public institutions, including state-owned enterprises (SOEs)."
Any effort in recent times have been undermined by the crises at play within our borders:
"Efforts over the last two years to revive the economy and rebuild institutions have now been undermined by the electricity crisis, further constraining growth and placing an additional burden on public finances."
But, Ramaphosa says that the government has gone with the budget in an attempt to keep things moving:
"We have made a deliberate decision not to pursue a path of austerity. Such a route would have seen deep cuts in spending on the social services that poor people rely on. It could have involved dramatically reducing the salaries of civil servants, the size of the public service, cutting bonuses and pensions, raising taxes and selling off key state assets. An austerity budget would have damaged our growth prospects further and weakened the ability of the state to stimulate economic activity and meet people’s needs.We have instead presented a budget that contains a range of balanced and well-considered measures to contain spending, increase revenue and encourage growth."
Briefly.co.za reported that Mboweni had announced the public service wage bill would be cut by billions over the next three years.
Ramaphosa says that this, coupled with reducing the budgets of several departments will see a reduction of R156 billion in non-interest spending.
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