Mboweni: Close the hippo’s mouth or face Argentina-like debt crisis

Fiscal crisis is on its way by 2024/25 if serious action is not taken, says Finance Minister.
Finance Minister Tito Mboweni is talking tough ahead of his Medium-Term Budget Speech set for October 21. Image: Moneyweb

South Africa is heading Argentina’s way on the fiscal front if “serious measures” are not taken “to close the mouth of the hippopotamus” – effectively addressing the widening gap between revenue and expenditure.

That’s the stark warning from Finance Minister Tito Mboweni, ahead of his Medium-Term Budget Speech set for October 21. He was speaking during a Stellenbosch University webinar marking the centenary of the institution’s economics department on Friday.

Moneyweb Insider INSIDERGOLD

Subscribe for full access to all our share and unit trust data tools, our award-winning articles, and support quality journalism in the process.

ONLY R63pm

Choose an option:

R63 per month
R630 per year SAVE R126

You will be redirected to a checkout page.
To view all features and options, click here.

A monthly subscription is charged pro rata, based on the day of purchase. This is non-refundable and includes a R5 once-off sign-up fee.
A yearly subscription is refundable within 14 days of purchase and includes a 365-day membership.

Click here for more information.

Mboweni warned that a “fiscal crisis is on its way by 2024/25” if serious action is not taken by government to rein in spending and bring down its debt.

“What bothers me most is what I refer to as the hippopotamus’s mouth … where revenue is declining while expenditure is going up. [We] have to close this mouth of the hippo,” he said, noting that tax revenue for the year is expected to contract by over R300 billion.

Read: SA to hit fiscal cliff within months

“We are headed for a fiscal crisis. Non-residents are selling South African bonds at an alarming rate,” he added.

“If we head towards a fiscal crisis, then we have a sovereign crisis, and then a banking crisis … We can no longer live beyond our means,” said Mboweni.

He stressed that tough decisions lay ahead for South Africa, otherwise the country would “head Argentina’s way” in a few years.

He also warned that his upcoming medium-term budget “will not be a popular one” in the context of “dealing with things like SAA and other state-owned enterprises”.

Mboweni made no mention of the government’s much-anticipated economic recovery plan, which will be aimed at boosting the economy post the Covid-19 economic fallout.

Read: Infrastructure a key part of economic recovery plan – Ramaphosa

President Cyril Ramaphosa said last weekend that the plan is set to be released soon and reiterated that infrastructure investment will be a key cog.

It however remains unclear whether some details of the plan will be revealed during Mboweni’s mini budget speech on October 21 or Ramaphosa will keep the plans under wraps until an investment conference expected to be hosted by government in November.

AUTHOR PROFILE

COMMENTS   40

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

You don’t need to tell us, minister. We already know this. Tell your buddy Pravin Gordhan who is going to blow more than 10 billion on a moribund airline.

It’s not us making these decisions, it’s your buddies in the ANC.

Too late Tito.

If an entire GDP was looted, perhaps two, with no care in the world and the looters living in the lap of luxury, the hippo’s mouth will never close, for they are the Hippo

Be careful not to open yours too wide, the rotten faction in your party will throw you to the wolves for disallowing theft

Your party was the cause of this, the ANC certainly cannot be the solution

Lets face it, SA, just another failed African country

How sad!

He needs to tell the unions too. Sixty cents out of every rand gathered in taxes, goes towards paying the grotesquely oversized public alleged service. This is the only place where realistic cuts can happen, by retrenching half or more of these useless individuals.

It all sounds great calling for massive employment reductions.

And it would be the sensible solution – IFF there was a healthy economy that would quickly re-employ the newly retrenched masses elsewhere.

But you already KNOW that is NOT going to be the case!

What do you think the unemployed masses – now literally starving – are going to do? Sit quietly at home, and just conveniently disappear out of your view??

Be careful for the unintended consequences of knee-jerk calls like this. This is exactly how revolutions and major social upheavals are started.

I’d be interested in know what your solution is for beyond the employment cuts you call for?

The public service isn’t homogeneous though. We don’t seem to be oversupplied with healthcare personnel or teachers. Hollowed-out institutions such as SARS and the NPA are chronically underresourced. Ditto Stats SA. It would be useful for a journalist to research just where the fat lies, and/or the pay differentials between public and private sectors if state employees are overpaid across the board, so that we have a specific complaint.

Who will listen? Average Joe does grasp the situation.

He won’t have balls to tell his buddies at ANC Conference: Minister Mboweni only speaks passionately when facing non-ANC people but chicken-out before ANC Ministers, President or all other comrades…sad but true

Don’t ask permission, just take the necessary action. Close the taps.

Day 0 has already hit. Tap closing won’t help.

Well done Tito – I like the analogy of the hippo mouth for spending too much. And your colleagues need to get the message constantly pounded into their heads.

Now, pse give us a similar analogy for the rampant corruption that describes the bribe givers and takers – we have to look at both the public and private sectors here as they are equally complicit. I would venture to say that corruption is costing a whole lot more than straight forward over-expenditure (i.e. over-expenditure not related to the lining of pockets).

Then the task will be to pound the latter analogy into their heads more so than the former. #LOCKTHEMUP…

Sorry, can’t agree. Public and private sectors are not equally complicit in corruption. Public sector officials sell contracts to the private sector firm willing to pay the highest bribe. The situation appears to be: Pay the bribe, or forget about getting the order (or any others) and close down.

Wow – so u acknowledge the ‘selling’ is done to the private sector, but that they (the private sector) is not equally complicit. So, when a young lady unexpectedly falls pregnant she’s what, 60%, 70%, or maybe more, responsible? Hell, there are certain radical fundamentalist religious groups out there that would say 100%. I suppose you’d not go that far though?

I suppose, also that there are no private sector actors out there (as in zero, nothing, nada) who , in the absence of being offered a bribe, would absolutely never take a chance in offering one? Silly me, of course not.

The solution to this is rule changes for tenders.

1. The full details, including detailed pricing, should be made public for all and any tenders.

2. Tenders should be awarded to the lowest bidder, end of story. The loophole of not having to appoint the lowest bidder, should fall away.

3. Coupled to (2), no empowerment points of any nature should count anything towards getting awarded tender. Price and only price should matter.

This would immediately have stopped the protective gear fraud during the pandemic. Cadres and politicians could not then win bids against competitors whose prices were lower.

I would also question whether relatives and associates of state employees count as ‘private sector’.

As an analogy – how about a pack of hyena’s after a 3 legged buck

Thanks, I think close but maybe it would be unfair to any creature to be used as an analogy in this instance. How about the COVID or EBOLA faction (SARS has other connotations)? I think that likening them to a virus would be apt. There’s a vileness and pervasiveness to a virus that attacks all populations / sectors.

Can’t resist (and no apologies). The analogy has to be – “corruption is like COVID after an inept White House”

Long-term bribery and corruption almost always happen between the public and private sector. When there is corruption within the private sector, the consequences – Steinhoff – serve a Darwinian function and annihilate the corrupt company very quickly.

Is the ‘Hippo’s mouth’ metaphor to mean the quantum of ANC corruption or the public sector wages bill or both??

There’s one man in govt who understands our predicament …but is one man enough?

No sign there’s anyone else who does?

Sorry Mr Finance Minister, you yielded to your colleaugue’s obsession with saving SAA at any and all cost after a sober stance of no more bailouts. What you apparently don’t realise is your instruction to departments to make FURTHER cuts to their already trimmed budgets, you insulted every victim of violence, every person who needs public transport, learner who needs a teacher or toilet, etc This while you will be the laughing stock of the world at DAVOS, having lost your credibility as a buffer against colleagues like Min Gordhan who can’t draw a line when enough is enough!
Watch the company you keep; don’t become guilty of putting party before country, like very many in your party! Rather walk away with your head high…

Lets not waste time here. ANC is the elected party and follows a communist manifesto. Until voters elect someone else, I’ll assume the current trend continues. Therefore all my capital will continue to be invested into economies where I will get a return.

The Finance Minister is not fruitful to South Africa just like the President.

Their actions, powers and presence makes no difference at all.

Agreed.

If they are serious the president has to lead by example and trim his bloated cabinet by 50%. That would close a lot of big mouth’s literally.

Mass scale job cuts will not happen. That is a pipe dream.
All the negativity aside. How long do we have to move investments offshore and at what split ? Few of us have the privilege to do that. Basically everybody is just along for the ride.

My burning question; now what? We know SA is heading into a hole, the ANC regime is pushing it with lockdowns, corruption and AA and BEE policies. So what will happen next year come budget time? Prescribed assets, wealth tax, IMF; wot say the “experts”??

Why should the fall in revenue concern anybody, when the National Corona Command Clowns insisted for months that the country could easily forego billions in “sin taxes”? Clearly they knew something about finances everybody missed. In fact, by sabotaging wine farms’ ability to earn revenue by fobidding the selling of wine on weekends, they are doubling down on their brilliant stategy. So yes, As Louise says, the government is demonstrating their utter indifference towards the vulnerable. Then again, communists are not sentimental about human life, let’s never forget that.

What good will an economic recovery plan be if you have crooks in government still looting funds! Can you not see the forest for the trees? There is rampant looting because there is no law and order. What part of this simple fact do you not understand.
It’s time to be more like Brazil and start convicting these crooks FIRST, start locking them up, enforce the damn law so they realise that they are accountable! There is a culture among these government crooks, they all seem to think that corruption is ok because everyone is doing it. And only once you have changed that way of thinking will things start to change for the better in this country.

Margaret Thatcher was able to save Brittian, which was labelled as the sick man of Europe during the 70s, from the sovereign debt crisis they were heading towards. She was able to turn the economy around because she had the majority support of the general public to enable her to confront the labour unions.

There is only one solution for South Africa, which is the sick man of Southern Africa under the ANC regime, after losing its former position of glory. Only a massive swing by the voters, away from the ANC towards the DA or the FF+ can prevent the imminent sovereign debt crisis, sovereign default and banking crisis that ends in the hyperinflation of the currency.

This brings us back to the sobering reality that in a democratic country, the health of the economy is only as good as the mental capacity of the average voter. The economy is only the manifestation of the mindset of the average voter. The national assets like the abundance of mineral resources, the strength of the financial sector, the level of development of the mining and engineering sector, the sophistication of the farming sector and infrastructure, and the size of the pension fund savings are irrelevant when the voting majority has the communalist mindset.

For as long as this voter is allowed to express his mindset at the ballot, it will be impossible to stop this relentless process that brings equalibrium between the value of the national assets and the value of the national intellect.

This is why the fastest-growing economy in the world is not a democracy. It is a one-party state that has the power to allow a market economy to thrive because the politicians are not under pressure form myopic voters who act in their self-interest to plunder property rights. We need a system where your right to vote is restricted to the amount of skin you have in the game, and where your contributions to society determine your opportunity to express yourself politically. In the meantime, the ignorant minds of the power-drunk Tripartite Alliance will take us further on the road to hyperinflation.

Words well spoken: “This brings us back to the sobering reality that in a democratic country, the health of the economy is only as good as the mental capacity of the average voter.” Did not think Moneyweb could get any worse than before but it it is quite awful now.Appears the copy/paste artists are running out of ideas! Any case I only come here for comments from sensei, the oke from Klerksdorp and a few others—the only sense to be found here.

A qualified franchise is something I was advocating for during the eighties as an alternative to apartheid/ separate development and one man one vote. I feel that paying taxes, a matric and the absence of a crimininal record could be useful start. However, how to implement this.? Maybe if the movement for the Western Cape to secede could gain momentum. In the meantime, invest offshore…

No worries Tito, at least when your racist, marxist-socialist economic ideology eventually fails which by all accounts is imminent, your “our people” can at least eat the hippopotamus!…phht please preach to your “comrades” as it’s they that don’t undersrand and couldn’t run a spaza shop, let alone our complex economyI !

Hi Tito , Why do you still mix with the thieves of the ANC. You know what they have done.

@Tito … Did you have a chat with your comrades from the union already?

As we’ve learned over many years, knowing what to do and having the political will to do it are two completely different things.

South Africa has their own “DEEP STATE” and unless they are put in jail, “Here comes trouble!!

“A massive swing by the voters from the ANC to the DA or FF” will never happen – the swing will be towards the EFF ( as the last election has already shown). Luckily for the ANC,the EFF is just another arm of their party! Clever move that! So who still believes that SA is a Democracy? It’s just meant to look like a Democracy – window dressing until the true colours come out ….not going to be a shock to any of us – we’re all here because not many of us have the choice to go elsewhere. The majority taxpayer is a sitting duck in the fair ground of an over populated under funded socialist country! God help us.

I suspect you are correct, the ANC is going to stay in power for years to come. Even if the ANC loses their majority in 2024 they will form a coalition with the EFF which will be much worse than anything we have seen yet. Unless the government implements bold business and energy friendly reforms soon, we are heading in the same direction as Zimbabwe and Venezuela with mass unemployment (+90%) and starvation. Unfortunately any positive reforms seem more unlikely by the day, so I have chosen to keep nearly 70% of my investment portfolio offshore. Both directly offshore for discretionary savings and rand-denominated funds for living annuity (Reg 28 doesn’t apply to LA). I don’t plan on leaving South Africa, but offshore investments offer better diversification and far greater opportunities. For most older middle class South Africans physical emigration is not financially possible, but taking most of your portfolio directly offshore in foreign currency (dollars or euros) is a second best option.

Exactly what I am talking about, the elite takes what they have earned in our economy offshore. They withdraw from the little that we have in circulation, then they blame the government for the collapse. The government in turn believe them and starve it`s own people( workers and communities) who turn to be the electorate, the main spenders( as the elite spends its income in Dubai, Cayman Islands etc.) its quite clear why the economy is collapsing.

There ought to be clear thinking from our government. We know quite well the reason behind the economic fallout. The capital flight, corruption, poor law enforcement, etc. It all emanates from the poor governance. The companies/business/ private sector get`s away with breaking the law( The Steinhoff saga, KPMG and other audit firms that were state capture enablers are left free) , dodging taxes.

The same government seeks to punish its own workers who are working hard to deliver services to the poor and vulnerable communities that is ignored by the elite. The workers are a majority in this country, they influence demand, if they are this stressed and deprived they wont spend and the economy will remain in doldrums because there wont be money in circulation as the elite took all that is with them offshore.

Just like other developing countries South Africa for it to grow it must first take its citizens serious, government employees are a majority I repeat, lack of confidence by government on its own personnel and those who put the government to power has a ripple effect to the economy and the country.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: