South Africa needs to contain rising debt, says Mboweni

Finance Minister Tito Mboweni has expressed concern over South Africa’s current debt crisis and said measures needed to be found to address it.

Mboweni was speaking during a Bloomberg webinar on Tuesday, 24 November 2020.

“I’m very worried about this because on the current trajectory, and if we do not act on the active scenario to contain the debt, and most fundamentally, to grow the economy so that we can get more revenue, so that the denominator can do much better and the debt to (GDP) can be contained,” he said.

Mboweni also said the country needed to apply structural reforms to stabilise the country’s fiscal position.

“We have to avoid a situation where the debt to GPD ratio comes to over 100%. That would… mean we would be facing a sovereign debt crisis,” he further said.

Mboweni said the bulk of government bonds is held by domestic banks, and in the event of a sovereign debt crisis, that would result in a banking crisis. He added that the debt crisis is not only due to the public sector wage bill, but was also attributable to the pattern of government expenditure.

Mboweni announces SA’s R500 million COVID-19 investment

Mboweni further added that government should mobilise private enterprise to invest in the economy after the lockdown has been lifted.

“That mobilisation is happening in the economic reconstruction recovery programme. Fundamentally, the confidence of private enterprise is key and the President is on course to generate that,” he said.

The minister had also announced a R500 million investment in the vaccine consortium that’s looking to produce a COVID-19 vaccine.

“South Africa is in a very fortunate position that we have been invited to take part in a consortium. Already a decision has been made that South Africa is paying R500 million to participate in the process of the production of the vaccine so that we can be in the frontline of those who can receive the vaccine,” he said.

“The Minister of Health is very happy about it and it’s very rare that any minister is happy with the Minister of Finance. So R500 million is in the pocket, in the consortium. South Africa will be participating as one of the few emerging market countries.”