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.
|Interest payments on debt||R13 608|
|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.
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.