{"id":393308,"date":"2020-04-29T07:39:17","date_gmt":"2020-04-29T05:39:17","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=393308"},"modified":"2020-04-29T07:39:17","modified_gmt":"2020-04-29T05:39:17","slug":"mboweni-on-the-economy-the-land-bank-and-asking-the-imf-for-help","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/393308\/mboweni-on-the-economy-the-land-bank-and-asking-the-imf-for-help\/","title":{"rendered":"Mboweni on the economy, the Land Bank and asking the IMF for help"},"content":{"rendered":"

South African finance minister Tito Mboweni said the South African economy could contract as much as 6.4% this year due to the coronavirus outbreak and the budget deficit could swell to more than 10% of gross domestic product.<\/p>\n

In a recording of conference call with clients of Goldman Sachs Group, Mboweni said the expected the contraction to be deeper than the 5.8% forecast by the International Monetary Fund, and said the rebound to 4% economic growth the lender projects for 2021 is possible but will require significant structural changes to the economy.<\/p>\n

\u201cWe are operating under very severe constraints,\u201d he said on the call.<\/p>\n

The projected rebound \u201cis possible but will require South Africa to be quite strong in structural reforms and the recapitalization of some of the firms which may come under stress during this period.\u201d<\/p>\n

While Mboweni will table an adjustment budget, including to redirect R130 billion ($7 billion) of spending to help fund a R500 billion\u00a0 stimulus package announced by president Cyril Ramaphosa, a date for that has not been set and the growth and deficit estimates given on the call are the first glimpse of what it may contain.<\/p>\n

The funding reprioritization could include delaying some spending on infrastructure, Roy Havemann, the Treasury\u2019s chief director of financial markets and stability, said on the call.<\/p>\n

Tax losses<\/strong><\/p>\n

The pandemic and a national lockdown that will only be gradually lifted after five weeks starting May 1, is weighing on output and will reduce tax revenue that\u2019s been falling short of targets for most of the past five years.<\/p>\n

That, and financing some of the stimulus package, will increase the shortfall on the national budget and increase borrowing requirements.<\/p>\n

There will be \u201cquite some substantial tax losses, probably totaling some minus 32%,\u201d Mboweni said. Government debt could go as high as 80% of GDP, \u201cwhich we are very concerned about\u201d and on the budget deficit \u201cit\u2019s safe to say one must not be surprised if the deficit is north of 10% of GDP,\u201d he said.<\/p>\n

\"\"<\/a><\/p>\n

Saving Land Bank<\/strong><\/p>\n

In a wide-ranging conversation Mboweni said the government would \u201cdo whatever it takes\u201d to ensure the survival of the government\u2019s Land & Agricultural Development Bank, the biggest lender to South African farmers, as it struggles to meet it debts.<\/p>\n

\u201cThe Land Bank is facing severe liquidity issues. It also came to my attention that they will be unable to pay salaries if they go on like this,\u201d he said.<\/p>\n

\u201cIt is in the interests of South Africa, and the government and the farming sector that the Land Bank is brought back to its peak.\u201d<\/p>\n

Mboweni dismissed the opposition of some officials in the African National Congress and its alliance partners to approaching the IMF for assistance on the grounds it could compromise South Africa\u2019s sovereignty.<\/p>\n

He rejected ruling party opposition to reforming the economy and suggestions that private pensions be forced to invest in state infrastructure, a practice known as prescribed assets.<\/p>\n

\u201cI just don\u2019t have time for ideological conversations at the moment,\u201d he said. \u201cSome of us are getting old, we don\u2019t have time to debate the issues we were debating at high school. We have to grab the animal by the scruff of the neck.\u201d<\/p>\n

Havemann was enthusiastic when asked about a proposal that South Africa sell a $5 billion social bond.<\/p>\n

\u201cIt would be great if we could get a social bond away at a low interest rate,\u201d he said. \u201cWe certainly wouldn\u2019t say no to it.\u201d<\/p>\n

\n

Read: South Africa\u2019s risk-based lockdown plan set to last 6-8 months \u2013 with coronavirus peak expected in September<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

South African Finance Minister Tito Mboweni said the South African economy could contract as much as 6.4% this year due to the coronavirus outbreak and the budget deficit could swell to more than 10% of gross domestic product.<\/p>\n","protected":false},"author":59,"featured_media":377349,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[14880,26,3921],"class_list":["post-393308","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-goldman-sachs-group","tag-headline","tag-international-monetary-fund"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/393308","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=393308"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/393308\/revisions"}],"predecessor-version":[{"id":393326,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/393308\/revisions\/393326"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/377349"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=393308"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=393308"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=393308"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}