The world is changing fast and to keep up you need local knowledge with global context.
By Jackie Cameron
- SA is on path to financial crisis – finance minister. South Africa is heading for a budget crisis by the 2024/25 fiscal year unless it addresses a widening gap between revenue and expenditure, Finance Minister Tito Mboweni has warned. At an emergency budget in June in response to the coronavirus crisis, Mboweni likened the country’s rising debt levels to a hippopotamus “eating our children’s inheritance”. “A fiscal crisis is on its way by 2024/25 if we do not take serious measures to close the mouth of the hippopotamus,” Mboweni said in comments posted on the National Treasury’s Twitter account on Friday, reports Reuters. He is set to present an updated plan to fix the economy to Parliament on 21 October. Africa’s most advanced economy was in recession before Covid-19 ravaged its economy, with the government’s strict lockdown imposed late in March putting major strain on businesses and households. The lockdown dragged growth to its worst contraction ever in the second quarter and cost the economy over 2 million jobs, says Reuters. “Estimates are that revenue for the year is going to contract by about R302bn ($18.4bn) and yet the pressure on the expenditure side is growing,” Mboweni added. “If we head towards a fiscal crisis, then we have a sovereign crisis, and then a banking crisis. We can no longer live beyond our means,” he has warned.
- Two state entities, Denel and the Land Bank, want more taxpayer support. Struggling state-owned agricultural lender Land Bank has asked South Africa for an extra R10bn ($603m) of government support over the next few years. Land Bank, which has already had a R3bn state cash injection in the 2020/21 fiscal year, has been in talks with creditors since it defaulted on its debt in April. South African state defence company Denel has asked for R3.8bn ($231m) in state financial support over the next three fiscal years, the National Treasury told Reuters on Friday. Denel, which makes military equipment for South Africa’s armed forces and export, has struggled to pay salaries this year amid a liquidity crisis aggravated by the coronavirus crisis. State firms have been a long-term drain on the finances of Africa’s most industrialised economy, requiring bailouts at a time of weak economic growth which have helped to tip its sovereign credit rating into “junk” status. South Africa’s National Treasury said last month that the Post Office, public broadcaster SABC and state-controlled airport operator ACSA were seeking a combined 10 billion rand in bailouts. Meanwhile, South African Airways is under a form of bankruptcy protection and may be granted further bailouts at a mid-term budget due this month.
- Richest countries work on getting world out of recession. The guardians of the global economy will gather this week under the cloud of the worst recession since the Great Depression, and a recovery dependent on scientists finding a coronavirus vaccine, reports Bloomberg. The International Monetary Fund and World Bank will hold their annual meetings, with both calling on the Group of 20 largest economies to extend a freeze in debt payments from the world’s poorest nations that’s set to expire at year end. The IMF has been encouraging governments to spend whatever they need to confront the crisis, even while warning that debt as a percentage of GDP will rise to about 100% for the first time. The G-20 agreed in April to waive billions of dollars in repayments by poorer nations until the end of the year under the Debt Service Suspension Initiative. The World Bank says this isn’t enough and wants borrowings reduced to prevent a bigger fallout.
- Covid-19 update. Just under 700,000 positive cases have been reported in South Africa, number 11 on the list of the world’s countries hardest-hit by Covid-19. Just under 17,700 people have died in SA of the novel coronavirus.More than 37m cases of Covid-19 have been reported worldwide, with more than 1.07m deaths. The US has the highest number, with 215,000 reported as having died of the disease. More than 150,000 people have died in Brazil, and India is third on the list with more than 108,000 deaths.
- A quick lock at performance on the JSE, at the close of the trading week, gold miners dominated the top five movers upwards, with DRDGold the best performer, gaining more than 7%. Investment firm Ninety One led stocks down, shedding about 5%.
(Visited 4,906 times, 3 visits today)
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.