Government to implement fiscal, economic reforms to bolster growth

President Cyril Ramaphosa says government will implement fiscal and economic reforms to raise confidence and grow the economy.

This comes at the back of a rising public debt that was incurred as government responded to the COVID-19 pandemic.

In the main, government debt is expected to reach R3.9 trillion in 2020/21.

“Since the economy and the fiscus were already weak prior to the current crisis, the starting point for ensuring fiscal stability is to close the gap between government spending and tax revenue.

“In undertaking this task, government has adopted an ‘active’ approach to managing the country’s debt.

“This includes faster implementation of the economic reforms needed to support investment and employment, raise productivity and competitiveness, and lower cost of living and doing business,” he said.

The President said the reforms will include the finalisation of electricity determinations, the unbundling Eskom and other steps to open up energy markets, the modernisation of ports and rail infrastructure and the licensing of high-demand spectrum.

He said under the ‘active’ scenario, which requires a programme of fiscal restraint, government anticipates a small surplus in the primary balance – which is the difference between non-interest spending and revenue – in 2023/24.

“Debt would stabilise at around 87.4% of GDP, after which it would gradually decline.

“The active scenario prevents debt service costs from continuing to rise faster than all other items of spending for the foreseeable future.

“In this way, it prevents an outcome where South Africa’s debt costs are higher than all other expenditure. A sovereign debt crisis causes investors to leave the country, and the country has to seek large bailouts from official lenders,” he said.

The President said new and urgent government priorities have been funded through the reallocation of budgets within and across functions.

He said it was a necessity to improve efficiency, meaning that government will have to do more with less.

“For example, more will need to be done using communication technology instead of spending money on accommodation and subsistence and travel costs.

“Government remains committed to improving education and health outcomes, and reducing poverty, as shown by the size of allocations to the learning and culture, health and social development functions over the medium term.

“The economic recovery and reconstruction plan that is being developed by government, alongside its social partners, will ensure that resources are directed to infrastructure and employment creation programmes, in particular.

“Alongside urgent structural reforms, such investments will lay a firm foundation for a return to economic growth and job creation.

“This, in turn, will increase public revenue, allowing government to reduce the budget deficit and lower its exposure to debt.”