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As the nation digests the 2015 Budget impact of the fuel tax hike, the jump in property transfer duties and the extra everyone earning over R37 000 a month will pay in tax – the real elephant in the room is mushrooming Government Debt. Not quite in the Greek or Japanese league, but we’ve been heading in the wrong direction for too long. Italy is instructive – that country’s economy hasn’t grown in 20 years, largely because of inflexible labour legislation, so to keep things going Government debt has trebled. For as long as the practical reality of SA’s labour laws are ignored, we will be treading the same depressing path. – AH
@tramano Hi T, It's also function of increased social spending and economic stagnation. One is vital for stability. Other is self-inflicted.
— Alec Hogg (@alechogg) February 26, 2015
By Alec Hogg
Apart from the fuel tax hike – which will cost citizens double the 1% increase in personal tax rates – the other major feature of yesterday’s Budget is the way Government Debt has surged way past what had been projected.
In the pre-Budget Speech Press Conference yesterday I asked Finance Minister Nhlanhla Nene how “hard” the 44% projection is – given that in 2012 his predecessor Pravin Gordhan put the three year hence peak at 38%. Sadly, I never got to hear his answer as the video link from Cape Town to the Pretoria “lock-up” died at the critical moment. But the Treasury official who was on hand for questions told me the ratio is certain to level off at this level.
For all of our sakes, let’s hope so. Government is already paying more than R100bn to service its debt. And by Treasury’s own estimates, that rises to more than R150bn in three years. Nene is mindful of the challenge this poses for his future Budget addresses – my notes show that at one point yesterday he said unless something is done to stop the debt growing, annual interest will soon overtake social grants.
He’s doubtless reminded of this fact when he pores over the graphic below – the scariest in the entire pack. Only two things will fix the problem: economic growth and no more borrowing. The first requires a Government that’s prepared to address a range of structural issues bedevilling the SA economy – not just Eskom. The second means running a balanced Budget, a near impossible task in a developing country. So how about it Nhlanhla? JZ? How about letting boldness be your friend?