You will encounter an incredible scenery and weather pattern change on the drive from Polokwane past the small town of Haenertsburg to Tzaneen, along Route 71. One minute you are passing the historic University of the North at Turfloop, the next you are in Zion City Moria – site of the biggest church in Africa. As you drive on, you will pass endless sun-scorched villages where dry watering holes are a recurring nightmare for herders and their livestock. Ten minutes later the landscape changes so dramatically it’s almost like entering another country. On the steep approach to the Magobaskloof mountain range, the sunny weather gives way to a thick of layer of cloudy mist that contrives with green lush forests to reduce visibility to a few metres. This is a place where flowing water is in such rich abundance upper-class Gautengers in 4x4s go trout fishing on weekends.
Here, finance minister Tito Mboweni has made his home on a five hectare plot, in a place that he says reminds him of the south of England, where he spent part of his youth in exile. Mboweni rarely gets off the mountain. He spends the days scouring its farmstyle cafés and the many boutique establishments. At night time he conducts a pilchards cooking show for his million followers on Twitter, who loudly disapprove of his culinary skills.
Simply put, we could find ourselves owing an amount equal to the value of all goods and services we produce.
He runs the country’s finances remotely, and regularly summonses National Treasury executives to meetings at his hideout. The presentation of the country’s budget, however, is the biggest event on any finance’s minister’s calendar, and this Wednesday Mboweni has made the long trip to Cape Town to tell the nation how our finances are shaping up. Given how badly Covid has hit the economy, he will bring little if any goods news with him.
While revenue collection has been gradually picking up, it is still not at target levels. This means the country has to borrow more to make up for the shortfall between revenue collection and spending. This is done by increasing a budget deficit already on double-digit figures. An increase in borrowings would see the country creeping much closer to the dreaded 100% debt-to-GDP ratio. Simply put, we could find ourselves owing an amount equal to the value of all goods and services we produce.
An increase in borrowings also translates to a rise in what we pay to service that debt. SA already borrows at a rate of R2bn per day, and we spend more on debt service costs than we do on healthcare. Mboweni warned when he delivered the medium-term budget policy statement that our debt levels were unsustainable, and that if we continued borrowing at this rate we ran the risk of a sovereign debt default. In his words, we don’t want to go the route of Argentina, Zimbabwe or Greece in the early 2000s. “Argentina had its ships attached. Greek civil servants and pensioners had their salaries and pensions slashed. In short it is doom and despair.”
In October he likened our fiscal position to being close to the mouth of the hippopotamus. “We can no longer live beyond our means; we have to close the mouth of the hippopotamus.”
Certain things must happen if we are to close this gaping hole. Government must contain the public sector wage bill, no matter how hot a political potato this is. It is encouraging to note that the state has won almost all the cases where unions tried to force it to honour the last leg of a costly three-year wage agreement. Now it must stand firm on the proposed public sector wage freeze for the next three years. There is simply is no money to pay civil servants more than they earn.
State-owned enterprises must not get a single cent from the national purse. Those that cannot live off their balance sheets or borrow on the strengths of those balance sheets have no reason to exist and must be disposed of. Eskom is, of course, a different beast altogether, being the biggest risk to our economy. Government has to find a way of reducing its debt while closely monitoring the turnaround strategy.
Then there is the devastating impact of Covid. The finance minister has to find money required to vaccinate 40 million South Africans by year end. He can either borrow or shave some more off the allocations to national departments, provinces and municipalities. Either way this money has to be found if we are to return to normalcy.
Mboweni has shown traces of disinterest in the job. As he makes his way down to Cape Town, he must decide if he still has the appetite for the job or if someone else should take over while he retires permanently up the scenic mountain. Our finances need a miracle to turn around, but they also need a finance minister who is not distracted.
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