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Govt now spends more on servicing debt than social grants

Jun 22 2017 12:46
Carin Smith

Cape Town - Servicing its debt is now costing the South African government more than the amount it spends on social grants, political analyst Daniel Silke said on Thursday.

This growing gap between revenue and expenditure by government means the pressure on government to raise taxes, especially indirect taxes, will become more and more acute. This in turn will put pressure on citizens and raise frustration on ground level, according to Silke.  

"The big issue regarding ratings downgrades is the pressure on government to raise capital in an affordable manner and to spend it on social upliftment matters," he said at the annual convention and expo of the SA Property Owners Association (SAPOA) taking place in Cape Town.

"I think the penny has dropped for some elements in the ANC that one (had) better listen to international reaction to increased local political risk. At the same time, other political views are that SA does not need global financial instruments and claiming that the country does not have to listen to the dictates of 'global monopoly capitalism'."

In his view, the big problem for Finance Minister Malusi Gigaba is that his own credibility is being undermined by the inability of state-owned enterprises (SOEs) - like South African Airways - to perform, reflecting the inability of the state to run SOEs.

"SA’s economic malaise is reflected in the gross domestic product (GDP) growth rate as an indicator of the inability of our policy framework to address issues facing the country. SA has actually underperformed emerging markets," said Silke.

"In terms of real net worth per household we have been and are on something of a decline. No wonder some shopping malls are starting to show strain and even blue chip tenants are moving out."

READ: Risk appetite easing downgrade impact on SA - economist

He pointed out that 8.9 million South Africans are out of work, and even salaried South Africans are feeling under pressure. Research shows that South Africans are frustrated because their hopes and dreams are either delayed significantly or remain out of reach. This then leads to protests as a loss or reduction of income has impacted the South African psyche.

"It is, however, important that we have seen a fight back from certain elements in the ANC regarding issues like the Gupta scandal, Brian Molefe, the Mining Charter, Hlaudi Motsoeneng and even the recent report by the Public Protector," said Silke.

"It shows elements in the ANC are disagreeing with what Cabinet is doing and it shows the depth of discussion in the ruling party."

According to Silke, a key challenge for the ANC will be whether it can draw in the younger vote in future. Linked to that would be which presidential candidate could establish that. In Silke's view, this would likeby be Deputy President Cyril Ramaphosa.

Read Fin24's top stories trending on Twitter:

sapoa  |  daniel silke  |  sa economy
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