Fiscal cliff now further in the distance for SA – Prof

It would be ‘suicidal’ of government to agree to a 15% civil servants’ salary increase.

A “fiscal cliff” has not yet been averted in South Africa but is further in the distance than before, a Wits University professor said on Tuesday.

The country had been heading for a cliff by 2026, with social assistance expenditure and remuneration of civil servants exceeding total government revenue, said economic and business sciences head Prof Jannie Rossouw.

A new fiscal forecast suggested the cliff was further away, accepting that the take-up rate in social grants would increase for the next decade and then level out.

The forecast assumed that an increase in civil servants’ remuneration would be limited to 10.5 percent per annum, and that the economic growth rate would be three percent per annum.

Rossouw was addressing the Cape Town Press Club ahead of Finance Minister Nhlanhla Nene delivering his 2015/16 budget in Parliament on Wednesday.

Last year, it was reported that government needed spending cuts of R25 billion and additional revenue of R44bn in 2017/18.

Rossouw said no firm proposals for cutting spending were tabled, implying that new and additional taxes would be raised.

He said limiting government spending was preferable to raising taxes.

There was no scope for a civil servants’ salary increase of 15 percent.

“To put it bluntly, ladies and gentlemen, that would be suicidal of government to agree to that.”

Rossouw said a moratorium should be placed on growth in civil service employment, promotions, larger increases for senior officials, and new external senior appointments.

Given the country’s fiscal needs, it could no longer afford to subsidise its Southern African Customs Union partners — Botswana, Lesotho, Namibia, and Swaziland.

The country also suffered “investment hesitation”, owing to power supply and policy uncertainty, negatively affecting the economic growth rate.

Rossouw recommended that principled leadership was the only way to steer the country away from a “constitutional crisis” and low growth rate and called for President Jacob Zuma to leave office.

“I am now in favour of an amnesty for Mr Zuma. Everything is forgiven but please go. We can no longer afford you,” he said.

“An amnesty would be cheap for the price.”

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