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SA’s mountain of debt looms

The new dawn is faltering.
President Cyril Ramaphosa and his new cabinet now face the enormous challenge of getting the country back on track. Picture: GCIS

After the euphoria of the swearing in of the new cabinet – a reality check on the dire situation of South Africa’s fiscal woes.

National Treasury recently quietly released the statements of government revenue, expenditure and borrowings for April 2019, the first month of the 2019/20 fiscal year. This came without explanation or attempts to identify any highlights. There weren’t any. The state of affairs for April is dismal. 

Revenue is up 6.65% to R73.8 billion on April 2018 (R69.2 billion). But 2018/19 set a very low base. April 2019 revenue fell some R43 billion short of the R116.9 billion budgeted amount for April 2019. Treasury did not provide the April 2019 budgeted amount in the statements, so I merely divided the total annual budget by 12. Corporate taxes, value-added tax (Vat) and import duties are down considerably. The South African Revenue Service (Sars) will be under a lot of pressure this year.

The April performance is further negated by the massive 21.6% increase in expenditure to R137.4 billion (April 2018: R112.9 billion).

Eskom a ‘financial asset’

The increase in expenditure can be attributed to the “Payments for financial assets” of R13.6 billion, which included the payment to Eskom of R13.5 billion in terms of section 16(1) of the Public Finance Management Act (PFMA). “Payments for financial assets” is in my view a misnomer, and we can only hope that Eskom includes it as a liability and not an asset. Unless government intended it as a free handout?

We shouldn’t forget that the purpose of section 16(1) is that “The Minister may authorise the use of funds from the National Revenue Fund to defray expenditure of an exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds.”

Does the Eskom bailout constitute “expenditure of an exceptional nature”? Not in my book.

The 2019/20 budget includes an amount of R23 billion, which is termed “Eskom restructuring”, and a contingent reserve of R13 billion. Is this contingent reserve set aside to pay for “emergencies” arising in other state-owned enterprises (SOEs)? It is to be noted that SAA has still not managed to publish its March 31, 2018 annual report, and one can only imagine the horrors lurking in the figures. This is not the only SOE in contravention of the PFMA – Coega and Safcol have also not published their 2018 annual reports. SOEs that may require bailouts in 2019/20 include Eskom, SAA, the SABC and Denel.

Read: SAA’s Vuyani Jarana quits

The April net deficit of R63.5 billion (Budget 2019/20: R255.2 billion) is funded with debt as shown below:

Financing the net deficit (Rm)



Domestic short-term loans (net)

25 000

32 089

Domestic long-term loans (net)

185 404

19 134

Foreign loans (net)

-20 972


Change in cash and other balances

65 811

12 935

Total financing (net)

255 243

63 530

The budgeted interest cost for the fiscal year is R202.1 billion, and the actual cost for April was R3.6 billion.

Where do we go from here?

Treasury issued a media statement on May 24 “noting” Standard & Poor’s decision to affirm South Africa’s long-term foreign currency debt rating at [non-investment grade] BB and local currency debt rating at BB+. S&P expects government to focus on new policy initiatives that will “support firmer growth and reform SOEs”.

Seven months and counting

President Cyril Ramaphosa announced government’s economic stimulus and recovery plan on September 21, 2018. Seven months later, investor confidence has not been reversed nor corruption halted. We are only beginning to see the true impact of state capture through the various commissions. Good governance at SOEs is yet to be restored and critical public institutions strengthened. Perpetrators are still to be charged.

It is unlikely that Sars will be fixed in the short term. It has been hollowed out and some of those who helped to destroy it (or turned a blind eye) are still there. The SOEs are out of control, and until they publish their 2019 results no one will have a clear idea of the funding they require to keep afloat, nor how much money has been spirited away in the common misdemeanours comprising procurement malpractices and irregular and wasteful expenditure.

In the days prior to Treasury publishing the April 2019 government figures, our minister of finance was cooking up a storm in his kitchen, tweeting: “Now we introduce onions, green pepper and garlic. Mix and the slow cooking goes on. Cooking needs time. It’s like drawing up the National Budget. Time and patience!!” Perhaps he has a plan to conquer our rising mountain of debt and wayward SOEs …

The new dawn is faltering.

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It’s ANC ideology versus arithmetic. So far it’s ideology 10, arithmetic zero, but we all know who is going to be the winner in the end.

Unlike the Americans who also have an ongoing battle with arithmetic we do not print the world’s reserve currency, so they can make their levitation last a little longer.

The recent resignations of top men from Eskom and SAA, and the entire board of the SABC does not agure well for their replacements who will have to be more malleable on this point, and be men willing to attempt the impossible.

Very annoying to see such inaction; reinforcing my view that Cyril and Pravin are just another clueless dog and pony show. Value destruction is all they know.

Time and patience without implementation leads to the demise of all.

Here is the crux of the matter:
Making a profit or bringing things to a sustainable path takes a cultural change and a new big push, most business take between 3 and 5 years to achieve this sort of thing.

It’s for that reason why I don’t see any success coming and quite possibly an IMF bailout, which will force changes in the next 5 to 10 years.

Wanting the anc to have a cultural change is like asking a zebra to grow a pair of … wings (*) and fly in the right direction.

My advice for anyone who lives in S.A. is to by Gold, Silver and Bitcoin. It’s a storm out there and only a matter of time before it hits.

Ps I would love to come back and help my country but one man cannot make a difference, ask the previous COEs of Eskom and SAA.

While the national treasury is quietly releasing these statements, ratings agencies are quietly outlining their downgrade.

Best be quietly out of rands before that happens.

Since socialism is the opposite of capitalism, the economic realities under both these systems will also differ substantially. SOE’s were the nation’s assets under the previous government. They were efficient and profitable, they provided world-class service and could service their debt. Under the new government, however, SOE’s are the liabilities of the nation. They are cash flow negative, they produce nothing, they are uncompetitive and they cannot service their debt. The ANC managed to do what is impossible in accounting science. They turned an asset into a liability. The problem is, they still list SOE’s and the debt of SOE’s as assets, while it is in fact liabilities. This fraud makes Steinhoff look like a bankrupt shebeen in comparison.

Socialism implies that even your best assets will turn into liabilities.

Socialism only “succeed” on the back of capitalism, once the capitalist’s money are wasted the “new dawn” (ewc,hunger, scapegoat mentality, etc) will surface.

New Dawn? That was the light from the IMF torches

Squirrel and Co. are just dreamers and it unfortunately ANC are just elected thieves

Beauty! … ‘IMF torches’ LMFAO

If our beloved President were serious about dealing with corruption and sending the culprits to jail they should be building jails now or does he think there is space available? Naive or uninformed comes to mind or just the knowledge that SA’s are stupid. Does he think out of almost 1.3 million government employees only 10 are corrupt??

You are going down the same road that Zimbabwe did, only from a higher base and with a lot more optimism! Given the horror show, who’s to say the IMF would even bail SA out. There is so much that needs to be cleaned up, I doubt you would qualify. As Zim slowly recovers from years of this sort of abuse, SA is sliding lower. What’s amazing is that you have not learned a thing from what Zim has been through. It must be an African thing.

Of course it’s an African thing.

Some reaction to the impending catastrophe:

P Bruce: A small price we as true South Africans must pay in return for having such a great leader.

M Verwoerd: Knowing Mr. Ramaphosa he will be shocked by these developments. Believe me, I will be shocked if he isn’t shocked.

Mantashe: This is all part of a Western imperialist conspiracy to force regime change.

The presidency: The New Dawn is the real deal. The real deal is the New Dawn.

The “new dawn” was always like a pot of gold at the end of a rainbow (nation)- an illusion.
And yes, definitely, what cure will Mboweni have? Mind you, there’s no longer an election looming and the ANC has bagged all the votes they wanted, so now putting up taxes to fill the gaping holes is no longer a problem!

The Afrikaans translation for “new dawn” is more descriptive. “nuwe doner”. Daar is ‘n “nuwe doner” in Luthuli House. ☺

Using vehicle analogy:

Before the IMF bailout, govt will first attempt for SA’s R4-trillion retirement fund assets to “kindly partner” with Govt with buying of Govt Bonds, aka prescribed assets.
(“…this is the part when the wheels are starting to deflate & come off”)

And when not enough tax is collected (as result of smaller economy) to “guarantee” these govt bonds, they will have to print much more ZAR to pay debt. This leads to fast ccy depreciation. (“…this is the part where SA will still run, but now down to its rims/brake discs”)

When there is nothing else left (even China not willing to loan to another Brics country), then the IMF will be the last option. (but political suicide for ruling party)

If the IMF refuse to loan anymore, that will be when SA “grinds to a definite halt on its axles/diff”

(And all that was initially needed to avoid the above, was very simple: Vehicle-SA needed to be used as a money-making commercial transport in a free market, to efficiently earn its keep for maintenance, without being hamstrung by ANC policies / unworkable social experiments, et al) The latter is like too many people catching a free lift with vehicle-SA, with only a few paying for upkeep & fuel.)

SA’s current path is clear (as the ANC has no idea what reform means) as it “reverts to the long-term mean average” of another African country, after the effects of colonialisation and racial “oppression”.
SA is the “last domino”…still falling. Thereafter Africa will be truly FREE….and oppressed.

Great article as usual Barbara – using facts and figures in its correct context, unlike most MW staffers

End of comments.



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