South Africa’s economy is in the Intensive Care Unit

It is very interesting that Finance Minister Nhlanhla Nene made no mention of the R 1 trillion nuclear deal in his first Mini Budget speech – or Medium Term Budget Policy Statement (MTBPS), as it is formally known.

How is South Africa going to pay for the nuclear deal?
How is South Africa going to pay for the nuclear deal?

This is an important event, at which the Finance Minister projects how much revenue will be available for the following three years, what the implications are for state expenditure, and how he intends to “balance the books”.
It turned out to be the shortest MTBPS in recent memory – not only in duration, but in terms of information and ideas.
We were told that the growth forecast for this year had once again been revised downwards, to 1,4% (while other emerging market economies are projected to grow at 6.5%); that there would be a budget shortfall of R25-billion over the next two years; and that taxes will have to bring in an additional R15-billion a year.
But Minister Nene’s speech buried the true story in flabby “belt tightening” bluster.
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The truth is the budget cuts will be far more severe than we are being told (reaching at least R50-billion over the three year period), and the tax hikes far more bruising.
What’s more, there is currently little sign that the 3% growth rate on which the Minister’s projections are based, will be achieved.
Even if government Ministers stopped milking the Ministerial handbook, and President Zuma repaid his ill-gotten Nkandla gains, and halved the Presidential spousal budget, it will not be possible to cut R50-billion off government expenditure over three years without seriously affecting front-line services. This will inevitably hit the poor hardest.
And yet President Zuma continues to spend our money like there is no tomorrow.
The Presidency is brazenly pushing for a tripling of its own budget, during the medium term expenditure framework, from its current R366 million to R1 billion in 2017.
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The biggest elephant in the room, of course, is the proposed R1-trillion nuclear deal, (which we’re repeatedly told is not a done deal with the Russians – which no one believes for a second).
All indications (including secret meetings) point to the fact that President Zuma intends forging ahead with this ill-advised, unaffordable nuclear procurement, which will be the biggest chunk of capital investment in the history of our democracy.
And yet it got not one mention in the mini-budget speech. Minister Nene should have told us that this deal can only be funded through further massive increases in the cost of electricity, which will kill business, drive away investments and strangle households.

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