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No room for complacency in implementing reforms: Treasury

Government’s largest Covid-19 loan is approved, now SA’s fate lies in how we pick up the pieces.
Government debt is expected to peak at 87.3% in 2023/2024 and decline after. Image: Dwayne Senior, Bloomberg

The South African government has no choice but to stabilise debt and implement the identified growth reforms in order to avoid the demise of the country, National Treasury’s Director-General Dondo Mogajane said. 

“Now it has dawned on all of us, Covid-19 including the downgrade by Moody’s has proven that if we are not going to be serious in ensuring that we implement, we will be in trouble,” he told Moneyweb following the International Monetary Fund (IMF) agreeing to lend the country $4.3 billion (R70.4 billion) to assist with government’s response to the pandemic fallout.

Read: IMF approves $4.3bn loan for SA to address Covid-19 challenges

The Rapid Finance Instrument (RFI) forms part of the government’s plans to raise R95 billion to largely fund the health and social aspects of the government’s R500 billion support package. It comes after The New Development Bank and the African Development Bank approved South Africa’s applications for loans of $1 billion dollars and $288 billion dollars respectively.

Self-imposed conditions 

The RFI is a vehicle that the IMF uses to extend funding to countries which have been affected by a disaster or emergency situation and require funding quickly for balance of payment needs. These loans are not subject to the traditional conditions set by the IMF, such as deep structural reforms.

The stipulations that do apply are self-imposed and contained in a Letter of Intent sent to the IMF, written jointly by the finance minister and the reserve bank governor, in which a country outlines detailed economic reforms it plans to implement as part of its motivation to have its application approved.

“We did not compromise the sovereignty of the SA government. All we did is access a cheap loan agreement and we will be able to save a lot in terms of debt service costs,” said Mogajane.

On Tuesday Treasury released this letter in which Finance Minister Tito Mboweni and Reserve Bank Governor Lesetja Kganyago explained that the South African government did not have outstanding debt with the IMF and has “adequate” capacity to repay the loan in a timeous manner. 

Read: South Africa to repay $4.3bn IMF loan from 2023

“External and public debt sustainability indicators will not change significantly as a result of the RFI purchase, and we will take any necessary measures to maintain debt sustainability,” the letter stated.

The Covid-19 economic disruptions – which cut revenue projections by some R304 billion alongside new stimulus liabilities – have placed great pressure on the state’s finances, leading to a 15% budget deficit. This excludes contingent liabilities government may face from struggling state-owned entities (SOEs).  

In the government’s ‘active’ management scenario that Treasury has chosen, the debt to gross domestic product (GDP) is expected to stabilise at 87.4% in 2023/24 and decline thereafter. 

In its letter to the IMF, the government said that it is “open to introducing a debt ceiling in addition to the nominal spending ceiling currently in place” to decrease the debt-to-GDP.

Mogajane said that it is critical that government contain debt levels.

Because “if it reaches 100%, 120% or 200% debt-to-GDP that will be our  ‘unsustainable’ and we will not be able to repay our debt obligations and we will actually be in a debt-trap situation.”

Fiscal consolidation measures will be proposed in the mid-term policy budget policy statement and the February budget to this effect.

Read: The IMF doesn’t play around

SOEs

The government further said that it would implement zero-based budgeting for national and provincial departments, take further measures to trim the public wage bill, rationalise transfers to SOEs, and streamline subsidies. 

“Moreover, our support to SOEs will be strictly conditional on meeting key performance indicators to improve their operational and financial health, so as to reduce its need over time,” the government wrote. 

Read:
SA’s failure to lower debt could trigger downgrade – Fitch
Eskom CEO on debt and monetary issues

In addition to putting public finances on a more sustainable footing, the government maintained a commitment to “removing structural constraints to growth” by implementing the economic reform blueprint, first released by National Treasury in August 2019

Government also notes that addressing Eskom’s issues – by ensuring its unbundling to increase its efficiencies and reduce the utility’s threat to the economy – will also be important. 

“Time to get to work”

‘We know what we have to do,” said Mogajane explaining that these are measures that government was already embarking on. 

“It’s up to us as accounting officers, heads of departments, director generals and politicians to say now is the time to really get to work because, if not, this precious country will vanish in terms of what we are known to be. We are known to be resilient and I think we must demonstrate that. 

“Our solution lies there. Our solution does not lie in getting more debt from the IMF or the others because that is unsustainable in the long term,” he added.

Corruption concerns

The announcement of the IMF’s approval of the R70 billion emergency facility was met with sharp criticism from the public, who generally fear the facility will fall victim to systematic corruption, which has contributed to weakening state finances.

Read: Ramaphosa loses spokeswoman to virus fraud crackdown

With increasing signs that so-called ‘covidpreneurs’ are exploiting the crisis to enrich themselves, President Cyril Ramaphosa announced that the Special Investigating Unit (SIU) would probe corruption involving Covid-19 funds. The SIU would form part of a multidisciplinary intelligence and security formation that will deal with these investigations. 

South Africans should not feel that things have gone to a state where there is just mayhem in the way that public finances are managed. We are still in control and we are still in charge,” said Mogajane.

He added that the fact that irregular tenders were flagged and are currently under investigation is proof that systems of accountability are working. 

National Treasury released emergency procurement instructions which detail measures to assist and regulate the procurement processes of state organs during the national state of disaster and require accounting officers and officials to ensure that procurement is done within the prescripts of the law. 

Government informed the IMF that it would ensure that Covid-19 funds are used in a transparent manner and reach their intended purpose, through regular reports and audits on expenditure – including a valuation on delivery that will be conducted by the Auditor-General within 12 months of the end of the fiscal year. 

The state will also publish all Covid-19-related procurement contracts and allocations with details about awarded companies and their beneficial owners. 

“All we can do is encourage Provincial Treasury to continue playing the most important role that they are playing, including ourselves in National Treasury, so that the integrity of the finance system and our country is intact,” said Mogajane.

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More money for looting.

The big test will be whether the Govt can do away with the massive theft and wastage factor in any form of Procurement, but those structural reforms have not taken place yet in the Govt.

The technology to control this and to provide absolute transparency exists. That should be the first project.

Lol. Go to local government run dept. Any of them from clinics to police station.

Computers get stolen so often or they are still running windows XP.
There are hardly any skilled accountants keeping track of the books or no accounting system in place at all.

All control system are manual and done on paper.
Its a mess.

And in the bigger departments with tech system in place, they don’t work due to management over-ride of controls.

The only solution in the short-term is for treasury to take control of accounting function across whole sphere of government.

I am sure the cadres are drooling and salivating over the R70,4 billion which is coming in. They are having sleepless nights because of the excitement … So soon cadres will do what cadres do best: Stealing and spending on bling.

South Africans should not complain about corruption. If they were concerned about it they should have IMMEDIATELY pushed the ANC thieves out.

The corruption has become so bad nothing will remain in a very short space of time.

There is not a single honest ANC member left as they should have taken the lead in getting rid of this scourge called the ANC.

The people “suffering” must go and look in the mirror when they want to know why? Toi-Toi without your mask does not help. The loyalty the the ANC has a high price.

You will pay.

Even if you are innocent but sat and watched, you are just as guilty. This was not a matter of shop lifting a tube of wine gums, this was watching grand scale fiscal looting.

As for CR his hands are as grubby as the next. Please don’t try and tell me he sat back with his hands in his pockets. his mates told him to dig in, they could not afford to have a clean cadre, he would blow the whistle, or the collective would dispose of him.

These guys are the world champs at obfuscation, they can blow smoke up a snake’s nose and not get bitten.

I doubt any thought has been given to the pieces to be picked up. They always shout for WMC to help lift/rebuild/pick up anything they break.

They will disappear, just as Tokyo Sexwale did the moment Trillion was focused on for state capture and looting.

We are not going to be in trouble Tito, we are already in trouble. What does it take to wake you guys up?

We are already unsustainable at anything above 60% (we are at about 62%, more or less and expected to reach 81.80 percent by the end of 2020) so no don’t wait for it to ‘reach 100%, 120% or 200% debt-to-GDP’ because that will be our ‘way beyond unsustainable’.

The people have lost faith in the word of government. Maybe it was because so many promises have been made in the past which have resulted in little happening that was promised. Perhaps an instruction to the NPA and the judicial system to speed up the prosecutions and let the voters and taxpayers see some high profile cadre going to jail. Did you notice how fast the former Malaysian Prime Minister was dealt with in the Malaysian judicial system only this week when he was convicted of corruption and given a jail sentence. Yes, he is appealing, but that appeal will not take years as happens here in SA because their system works and ours does not.

The cadres pretend to have had this epiphany that corruption should be stopped. They put pen to paper and send this idea to the IMF as part of their effort to postpone the inevitable collapse of the state. The government does not have an audience in the government structures, so they send a letter that addresses corruption to the IMF.

Tito does not have an audience in the ANC or the government, so he speaks to us, the citizens, on twitter. The president solemnly swears to break up Eskom, start green projects, create jobs, end corruption and send criminals to prison. Nothing happens, nothing.

Who is supposed to prevent corruption when everybody in every structure of the ANC is corrupt? Who is supposed to implement these wonderful strategies when all the structures of the state have been gutted by cadre-deployment?

We do not have a state any more. The state is a glorified social grant scheme. The most inefficient, corrupt, lazy and incompetent people are concentrated in government offices.

The IMF cannot save us. Only free-market policies can save us. The total privatization of all arms of the state is the only solution. Appoint, and pay the audit companies in every town to deliver government services and things will turn around on a dime.

The ANC won’t do this, because their opportunities to loot will disappear. That proves the point that the cadres are there for themselves, not for the “people”.

Borrow money via taxpayers to loot.

I don’t think the guys at Treasury, including the Minister of Finance know what they’re doing.

Treasury made sense and there was confidence in it until Tito and Kieswetter came into the picture, now even Mojagane sounds confused and lost.

agree. They dont have a clue. They are in unchartered waters… tax money is on the decline… and they dont know how to fill the gap.
Its all ok when there is tax monies to waste… this time the belt will make Tito thinner.

Tito has tweeted that he is a Central Banker.
If he is a Central Banker…. what the hell is he running the Treasury for.

By the way, as a Central Banker he did sweet f all. If anything, the guys below him did the work.

26 years later still all talk !!!!!

The only truth we can take from this article is that it provides us with the perfect definition of an oxymoron. “There is no room for complacency” Coming from a regime that has already, and continues to loot billions, that is a bit rich.

BMW,Mercedes and Range Rover dealers be ready. Good cash business is on it way.

Agreed, no self respecting cadre would dare to drive in any car which costs less than R1 million.

The only way to get rid of these ANC parasites is to starve them of anything they can loot.Every Rand they get their fingers on is used against the productive segment of society. These crooks will promise anything to anybody to get more tosh to loot.

Perhaps revealing is that the undertaking is to investigate but no indication that anyone, especially ANC politicians will be prosecuted.

Agree more corruption. Hope some of this money ends up in the Townships where the poor are struggling with access to healthcare. Unless we open up the economy deal with Covid how are we going to pay back these loans.

Alcohol ban, Tobacco ban etc most of our Ministers including the President and NDC are Overweight or Obese?

Actually tired of writing.

Wally

This sounds like yet another ANC “Plan.”
And by the way, it’s our descendents that are picking up the pieces through higher taxes!

End of comments.

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