You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

South Africa needs big fiscal effort to stabilise debt – IMF

Trims its growth forecast to 2.8%, says the country needs to ‘contain the wage bill’ and get tough with SOEs
SA took out a $4.3bn (R65bn) loan from the IMF in 2020, its first yet from the organisation at a sovereign level. Image: Andrew Harrer, Bloomberg

South Africa requires a growth-friendly yet sizeable fiscal effort to stabilise and lower its debt burden, reduce country-risk premiums and improve investor confidence, according to the International Monetary Fund (IMF).

The Covid-19 pandemic exacerbated South Africa’s existing vulnerabilities which means “tackling long-standing fiscal and structural challenges is more critical than ever to set the stage for a robust recovery and pursue strong, durable, and inclusive growth,” the Washington-based lender said on Wednesday in a statement posted on its website after a virtual staff visit.

South Africa’s economy probably contracted the most in nine decades last year as a lockdown to curb the spread of the virus weighed on output. Even before the virus restrictions, the country was stuck in the longest downward business cycle since World War II, with power shortages and bailouts for loss-making state-owned enterprises (SOEs) contributing to a rapid deterioration in public finances.

The IMF on Tuesday trimmed its forecast for South Africa’s 2021 economic growth to 2.8% from 3% and sees expansion at only 1.4% next year.

The country took out a $4.3 billion (R65 billion at the current exchange rate) loan from the lender in 2020, its first yet from the organisation at a sovereign level.

The National Treasury said in October it plans to reduce spending by about R300 billion over the next three fiscal years as it targets a primary budget surplus in 2026, when debt is expected to peak at 95.3% of gross domestic product. However Finance Minister Tito Mboweni’s efforts to reduce a government salary bill that’s surged by 51% since 2008 have been met with a backlash from politically influential labour groups.

Performance targets for SOEs

“Reining in large fiscal deficits and debt will require containing the wage bill and avoiding ill-targeted subsidies and transfers to inefficient state-owned enterprises,” the IMF said.

While phasing out virus outlays when the pandemic subsides, the government should also make transfers to state companies conditional on meeting “ambitious but realistic performance targets,” it said.

There should also be special focus on improving the efficiency of state-owned companies and the quality of their services, taking a harder line on their finances and undertaking well-defined strategic equity partnerships, particularly in the energy sector, the lender said.

The National Treasury said in a statement the country remains committed to reducing its budget deficit, stabilising debt over the next five years, and returning the public finances to a sustainable position.

© 2021 Bloomberg L.P.

COMMENTS   9

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

You must be signed in to comment.

SIGN IN SIGN UP

Well, start with the endemic intrinsic corruption and institutional theft the ANC has perfected and you are 90% there.

Contain the wage bill and get tough on SOEs? Have they not done that for a long time? Or was it only talk.

Just cut millions more jobs and let’s get a bigger shovel. This “gubment” is clueless!

LOL – There will ne no growth in SA in 2021.
Think the contraction (destruction) will be around 3 percent.

The Zondo Commission proves all the statements that were made by Jacques Pauw in his book, The President’s Keepers. Although billions have been stolen via state capture and illegal plunder, much more has been lost to legalised plunder.

When we read between the lines of the comments from the IMF, it is clear that they are referring to the effect of legalised plunder. No country can afford high levels of crime, but the crime of legalised socialist policies does even more damage because nobody protects the taxpayer. The judges and the police force are on the side of plunder and nobody remains to protect property rights.

The various redistributive policies like BEE, municipal rates and taxes, the progressive tax rate, taxes on capital, the Mining Charter and cadre-deployment are examples of legalised plunder. How do we identify legalised plunder? When the law allows the state to act in a way that individuals are not allowed to act. Individuals are not allowed to take the property of another person, but a group of individuals, the state, is allowed to plunder property. One man cannot change the law to legalise plunder, but a group of men can and do.

The ANC relies on legalised plunder to buy votes. They cannot afford to obey the advice from the IMF. They will follow Mugabe and Maduro into the abyss instead.

I agree. Flee the place while you can if you can afford to or are young and skilled. The fiscal cliff has to approach a some point and even this government can see that the only ways out is the IMF(not going to happen) or deflate the Rand down to 25 or 30.

If you cannot leave-like me-too old -at least externalize all of your wealth-the lot!

I am also not optimistic about South Africa’s future. Unions won’t allow government to implement much needed business, energy and fiscal reforms. Unless something changes we are heading in the same direction as Zimbabwe and Venezuela. The ANC can’t go to the IMF so they will first steal our pensions once that is gone they’re going to start printing money to pay salaries, grants and rand denominated debt. This will all lead to higher inflation, unrest and crime. I am in the same boat as you to old and not rich enough to emigrate. In the last few years I haven taken most of my discretionary investments directly offshore. So except for my house, living annuity and some discretionary money market, a large proportion of my investments are far away from the thieving government.

Like talking to a brick wall.

TSK!!!!

Isn’t it ironic? Now the West wants to tell us how to recover, caused by their sanctions, political pressure and what not else. Meanwhile, worse discrimination, crime, murder, theft, corruption etc etc is happening right now with their regime of choice (shame, based on the poor ex-souf efricans hiding in zambia). So, where are the sanctions, the human right abuses, the demonstrations at SA embassies etc etc now? Look at Zim to see where we are heading, we are already not too far from their unemployment rate.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / PODCASTS SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: