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SA’s budget as a household budget

It’s not pretty.

The MTBPS paints a pretty dire picture of government’s financial health. However, with the trillions and billions of rands shown in the budget it is difficult to appreciate just how much trouble the country’s finances are in.

To simplify matters, I made a few simple calculations and chopped off several zeros from the numbers and presented the country’s budget as a normal monthly household budget – a budget most people can relate to.

It reflects the sad state of affairs as the expenditure greatly exceeds income… it is clear that the money of this household has run out.

2017
Income R99 458
Expenses R117 758
Interest payments on debt R13 608
Education R26 483
Health R15 800
Security R16 292
Community development R16 125
Economic development R15 908
General public services R5 192
Social development R19 517
Payment to financial assets R1 625
Budget shortfall -R18 300
   
Total debt R2 530 500

Source: Author’s own calculations

This budget shows a total income of R99 458 a month. Not bad, but the total expenses amount to R117 758, representing a shortfall of R18 300 or 18% of the total income. This means that the household needs to urgently see the bank manager and plead for an extended overdraft or a personal loan, on top of its existing debt of R2.5 million.Source: Author’s own calculations

This existing debt is also a big problem, as it sucks interest payments of R13 600 a month from the budget and it does not bode well if additional credit is granted, as interest repayments will continue to increase.

(This is based on the liberal assumption that a bank would indeed raise the household’s credit limit within the current credit legislation.)

Austerity and revenue growth

The household should therefore call an emergency meeting where all members of the family are appraised to discuss the dire state of affairs. The household should also use this meeting to hold blatant transgressors to account. During the meeting, each and every member should be consulted on how income could be increased (a very difficult thing to do in the current economic climate), and how to cut spending (normally easier to do but very painful as unpopular decisions must be made). The key is that every family member appreciates the financial position and commits to remedial action. If this does not happen, the household will see the sheriff of the court at the door much sooner than they might think.

Government’s position

This, of course, is the position the South African government is in. But, unfortunately the head of the house hasn’t called for an emergency meeting. All stakeholders within government are not held to account. There is no prospect of increasing revenue and there are no plans on the table to tighten the belt. In fact, it seems as if the leadership is totally unconcerned about the financial position and is more interested in buying a new car.

The reality is that government should look at the current scenario and appreciate that if the situation is not turned around soon, the IMF may be at the door.

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all I can say is what a c dickens said a long time ago:-“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

I don’t usually agree with your comments but finally I have to concede. We (in SA) are stuffed. With all the seeds, planting and harvesting mentioned in the first 20 minutes it sounded agricultural. Then it was R50.8bn down the tubes and thanking Zuma and Ramaphosa for their assistance and back to re – inventing ourselves, I went to get a six – pack. We are truly ****ed.

just to clarify – I take no happiness in this. all I have been saying is get yr funds off shore while you can. plain and simple

Robert – the angry old man – in Sydney
You must be tremendously happy today that SAfrica has had more bad news
But SAfricans are a tough breed (thats why you left) and will overcome.

Perhaps your limited budget will allow you to buy a second cup of coffee today?

+westcliffman…. you sound pissed at Robert or is it envy

Robert and Magnus Heystek have been harping on relentlessly about the same old thing for ages now, warning everyone to get out if they can A.S.A.P, so allow them to be smug, this is a victory they well deserve.

Of course, reality is, those of us still here, for one or the other reason, financial, family, jobs, age or otherwise, can’t just up and leave, so we have to stick it out, but fortunate are those who were able to get out in time or at least convert their wealth into foreign currency etc.

So Robert, in your smugness, spare a thought for those of us who simply can’t leave.
I love your comments by the way, they dish out a sharp dose of reality.

thank you for that – yes that’s all I have been saying -get yr funds off shore while you can

Remember boys and girls the Australian budget looks even worse.

tell me more!!!! there is an issue with DOMESTIC debt (ie private debt to fund the housing bubbles in Sydney and Melbourne)- but govt debt really low and interest rates staying low for next 2-3 years. all I want is aus$ to fall even more than it has so far

What – why do I get only ninety nine and four and fifty eight rands – I want more, I demand more!!!!

If this were a household budget, time to cut up the credit cards.

Hi Ryk – Dit is ‘n baie mooi eenvoudige opsomming en dit laat ons besef hoe benard die finansies van die regeering is.

Even though the budget was an unmitigated disaster, please don’t fall into the trap of comparing a country’s budget to a household’s. As tempting as it is, there are a couple of key differences, one of which that government spending can boost the economy, and suddenly cutting back on it would slow things down further. Recession anyone?
That said, we are haemorrhaging money which is hurting the very people who benefit the most from government spending.

Having said that. If government can only achieve Investment into the economy, all those thousands of millions wasted every year, by creating jobs or assisting private enterprise to create more jobs, it will bring us very far.

Gigaba’s lack of a plan was pretty useless, but a lot of blame actually needs to be directed at Pravin. Nothing was done to cut bloated government expenditure, and Pravin’s raising of taxes bumping against the laffer curve has only spelt out a reversal in revenue. SOEs not really his portfolio, but he could have been tougher to deserve the saintly image the public now bestows upon him.

Indeed, in the US the government has only been able to consistently collect 16% of GDP as tax since 1950, regardless of what the tax rates are.

But different from a household, the government will increase its income by increasing taxes.

The budget will work (in time) if the anc simply “walk away”, stop with all this “over regulation”, “transformation” and “bee” nonsense and allow businesses and entrepreneurs to do their business against the normal free market forces. As soon as the economy picks up it will gradually allow most of the “social development” and “economic development” budgets to be scrapped and our budget will work again (check the numbers above). The issue with this “household”, in the above example, is that they can’t show anything lasting for their expenditure. A limited amount of debt is justified when it puts assets on the ground that will grow your income. But SA literally eats their money (by social grants) rather than spend it on infrastructure that will create jobs for those very same people that are in need of grants.

Indeed. In addition to the considerable fruitless and wasteful expenditure, the inefficiencies, there are many “nice to have” items, such as these upliftment programmes that invite abuse.

Social services such as grants are fruitless, they are wasteful, as they do not add value to the economy. These monies are handed out in return for no work, no added value, no wealth creation.

These must be cut back to become competitive. Other countries in Africa (I do travel to many of them on UN consulting service missions) are laughing at ZA for the extremely poor work ethic – the want of money for doing no work and expectation of handouts that becomes a deadly cancer.

It’s not the fact that we’re short of money that has everyone rattled, but rather, the fact that there isn’t a plan whatsoever to mitigate this shortfall.
As it is with our SOE’s, the sale of Telkom shares is but a temporary bail-out, all it does is plug the hole in the short-term, doesn’t stop the root cause of the leak, and that, more than anything ladies and gentlemen, is why yesterday’s budget was so sobering, and why our currency is currently at R14,15 or so to the dollar.

This government reminds me of the old demolishen darbys held at Goodwood stadium year ago – every government official is out to totally destroy the economy and they don’t care who in government they destroy even if that person is from their own party. I can’t for the life of me fathom why people vote for this useless party as all they do is promise (which are not kept) and tell us what they are going to do, rather than telling us what they have achieved.Medupi and Kusile are prime examples of promises and them being unfulfilled and way over budget and late delivery to boot

What would also be interesting is to highlight public service costs on a total cost to company basis as a percentage of the budget in a fashion like below

Executive xx
Legislature xx
Judiciary xx

Public service management xx
General public servants xx

This would highlight what a top heavy and expensive public service we have GIVEN WHAT WE GET BACK as citizens.

or far simpler, cost to income ratio (cost of government to GDP) compared accross BRICS

This is just following the example of almost every post colonial country. I think we are close to the end of this little experiment.

MTBS makes it clear we going the IMF route. Pass da popcorn and blankie….this is gonna be a serious horror movie.

Hahahhahaha!! I loved this simple analysis of SA’s economic affairs. The sad part is that there is clear reluctance by the head of the household to acknowledge that the house is in a mess, and discipline unruly kids.

Ryk, you are some bloody creative brainbox. Hahahha!! Please give some creativity to SABC’s content providers. **tongue out**

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