South Africa
South Africa is in financial trouble

The Minister of Finance, Malusi Gigaba’s, “maiden” medium-term budget policy statement exposes the full horror of President Jacob Zuma’s catastrophic management of the economy in South Africa.

The Rand immediately plummeted to R 14.10 to the dollar, its lowest level this year.

Economic growth has slowed and the February projection of 1.3 % has been lowered to 0.7 %, still higher than the 0.5 % recently projected by the International Monetary Fund. Economic growth is expected to recover slowly, reaching 1.9 % in 2020.

The minister’s medium-term budget policy statement reveals a full-scale budget “blow out” with:

  • a massive revenue shortfall of R 50. 8 billion, which is the largest revenue shortfall since the global financial crisis;
  • a breach of the expenditure ceiling by R 3.9 billion, which was in part caused by the R 10 billion bailout of South African Airways, and which had to be offset mainly by using the contingency reserve (R 6 billion), projected underspending (R 3 billion), and selling the family silver, in the form of shares in Telkom shares (R 3.9 billion); and
  • an increase in the budget deficit by R 54 billion to R 203 billion, or 4.3% of GDP in 2017/18.
  • The budget  results in an increase in national debt of R 67.9 billion to R 2.3 trillion, or 54.2% of GDP and an increase in debt service costs of R 900 million to R 163.3 billion, in 2017/18.

The budget “blow out” ricochet’s through the medium term pushing national debt to R 3.4 trillion, or 59.7% of GDP, in 2020/21.

Gigaba’s maiden Medium-term Budget Policy Statement was delayed when the EFF disrupted proceedings. Gigaba started his speech after the opposition party left the house.

The rand was trading at R 13.74 against the greenback just before the proceeding in Parliament started.

 

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