The government has a “slow bleed” and is unable to achieve its fiscal objectives and stabilize net loan debt because private sector investment has collapsed in South Africa.
This is according to DA shadow minister of finance, David Maynier, who delivered a speech during the debate on the Fiscal Framework 2017, in Parliament on Wednesday.
Maynier said that, two weeks ago, minister of finance Pravin Gordhan tabled the main budget with both hands tied behind his back, and with very little political space, fiscal space, and policy space.
The minister tabled the fiscal framework, outlining government’s revenue, spending and borrowing projections over the medium term, which envisages:
- Economic growth recovering to 2.2%;
- Revenue of R1.66 trillion, or 30.1% of GDP;
- Expenditure of R1.81 trillion, or 32.7% of GDP; and most importantly
- A budget deficit of R145.8 billion, or -2.6% of GDP, by 2019/20.
“Whatever the case, the central fiscal policy objective of government is to stabilize net loan debt, which is projected to reach R2.67 trillion, or 48.1% of GDP, in 2019/20,” Maynier said.
To illustrate the magnitude of net loan debt, the DA noted that the country’s net loan debt of R2.67 trillion is the equivalent of:
- A debt of R47,000 per person in South Africa; or
- A debt of R6.68 billion per member of parliament.
The political party pointed out that debt service costs are now the fastest growing expenditure item on the budget and are projected to reach R197.3 billion in 2019/20.
“We were told that in Main Budget 2016 net loan debt was going to stabilize at R2.19 trillion in 2017/18, or at 46.2% of GDP.
“Then we were told in Medium Term Budget 2016 that net loan debt was going to stabilize at R2.63 trillion in 2019/20, or at 47.9% of GDP.
“And now we are told in Main Budget 2017 that net loan debt is going to stabilize at 48.2% of GDP, in 2020/21,” Maynier said.
The “root cause” of the “slow bleed” is stagnant economic growth, which is projected to average 1.83% between 2017 and 2019, and which is below what is required to stabilize the country’s public finances, the DA said.
The economic growth projection is 1.3% for 2017, up from 0.3% in 2016, due to a moderate recovery, it said.
Gordhan also penciled in revenue of R1.41 trillion, or 29.8% of GDP, for 2017/18.
“However, because of lower-than-expected revenue collection – due to stagnant economic growth and poor tax administration – the minister was forced to announce tax proposals to raise an additional R28 billion in 2017/18,” Maynier said.
“What this means is that whether you are rich, and taxed directly, or whether you are poor, and taxed indirectly, the minister will reach into your pocket and help himself to the R28 billion, required to plug the fiscal hole in 2017/18.”
The DA said that substantial revenue could be raised by disposing of non-strategic assets, including the sale of government’s stake in Telkom, which could raise about R14.7 billion.
It again called for the government to consider selling non-strategic assets to raise revenue.
“In the end the root cause of the slow bleed, and the fact that government is unable to achieve the central fiscal objective and stabilize net loan debt, is that private sector investment has collapsed in South Africa,” Maynier said.
He questioned who would invest in the country:
- When President Jacob Zuma, ditches his own policy of “inclusive economic growth”, set out in the National Development Plan, and inspired by Trevor Manual, in favour of “radical economic transformation”, inspired by the likes of Hugo Chavez;
- When you have an aspirant Deputy-Minister of Finance, Sifiso Buthelezi, who seems to believe that corporate income tax should be increased to punish the private sector for not investing in South Africa; and
- When you have another aspirant Deputy Minister of Finance, Brian Molefe, who is committed to destroying the private sector, or what he calls, the “monstrous beast” in South Africa.
“We cannot stop the madness, but we can start doing our jobs,” he said.
The shadow minister said that “president Jacob Zuma, and his cronies inside, and outside the ruling party, are reaching into your back pockets and are helping themselves to billions of rands”.
“That is why, unless the corruption and waste stops in this country, it is not going to be long before people say, ‘we are prepared to pay our fair share, but this far and no further’ and we have a tax revolt on our hands in South Africa,” Maynier said.