I’m becoming increasingly concerned that the precipitous state of South Africa’s finances is under-appreciated within government circles. I can see why that may be the case: despite years of warnings and rating downgrades, the government continues to fund its budget deficit. In addition, 10-year bond yields are only marginally higher over the past five years.
Added to this, the public sector wage bill has put considerable pressure on expenditure since 2009. As a result, the South African government needed to borrow R214-billion in the fiscal year ended March 2017. This has risen to R404-billion for the year ended March 2020. We need to rein in spending. For several years, the National Treasury has tried to do this by cutting department budgets, leaving them to figure out how to deal with it. That solution has also run out of room. Several government departments run out of money several months before the end of the fiscal year – and halt payments until the start of the next year.
If such an agreement cannot be reached, then job cuts are needed next year. The wage bill must grow slower.
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