- Minister of Finance Tito Mboweni delivered his Supplementary Budget on Wednesday
- Mboweni highlighted that debt is South Africa's biggest weakness
- The Minister added that the economy will also shrink to a 90-year low
South African Minister of Finance, Tito Mboweni, quoted the bible as he delivered his Supplementary Budget this afternoon.
Mboweni quoted from Matthew 7:13 which reads:
"Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and many enter through it. But small is the gate and narrow is the road the leads to life, and only a few find it."
Mboweni said on Wednesday that the "narrow gate is an active approach, a nation that takes active steps to rapidly stabilise and grow the economy."
In his emergency speech, the Finance Minister outlined several measures taken by the government to boost the economy while stabilising the country.
Mboweni was also not starry-eyed as he also highlighted the problems South Africa faces. He said that out of every rand that South Africans pay in tax, 21 cents goes to paying the interest on the country’s past debts.
Mboweni said the country needs to build a bridge towards recovery. He said debt was the country’s weakness, adding that South Africa had accumulated far too much debt and the current downturn was set to add more.
The Minister said the economy is expected to shrink by 7.2%, the worst level in 90 years. However, he said inflation is expected to remain low. Mboweni said cheap oil prices during this time have also softened the blow.
Mboweni said the he storm is not over yet, but if South Africa follows health protocols and make the right decisions, things will soon get better and the storm shall pass.
In the February budget, Mboweni said they expected that the global economy would expand by 3.3% in 2020. He added that it is now expected to be a contraction of 5.2%. This will bring about the broadest collapse in per capita incomes since 1870.
Mboweni added that gross tax revenue collected during the first two months of 2020 was R142 billion, compared to the initial forecast for the same period of R177.3 billion. This means that South Africa is already R35.3 billion behind on the 2020 target.
The Minister placed a caveat on the borrowings made by the government, claiming that they will almost entirely consume all of South Africa's annual domestic savings, leaving no scope for investment or borrowing by anyone else.
Mboweni said the government intends to borrow around $7 billion (R120 757 070 000) from international institutions to support the pandemic response.
The Supplementary Budget also proposed R21.5 billion Covid‐19‐related health care spending and a further R12.6 billion to services at the front line of the response to the pandemic.
Mboweni said that if economic growth continues to stagnate, South Africa would risk having a sovereign debt crisis.
Mboweni added that all relief packages will come to an end in October. He also explained that all the money that will be obtained from international institutions is not a source of revenue and has to be paid back.
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