S.Africa at ‘turning point’ says minister, cutting growth view
South Africa's economy is at a "turning point" and the government must cap spending and raise taxes to tackle its soaring deficit in the face of stalling growth, the finance minister said Wednesday.
The newly appointed Nhlanhla Nene also hinted at the possible privatisation of some state assets — a move the government has resisted for years.
Presenting his first mid-term budget policy statement to parliament, Nene slashed this year’s growth forecast to 1.4 percent, from the 2.7 percent estimated in the February budget.
Nene blamed the slide partly on the global environment, but admitted that it also reflected domestic energy shortages, strikes and “administrative shortcomings”.
“The budget deficit is high, debt levels have approached the limits of sustainability,” he told reporters ahead of his parliamentary statement.
Economic growth is expected to rise to three percent in 2017, but that is still well below its potential and means the government is unable to raise as much tax as it expects — and needs — to tackle ailing public finances, he said.
It also falls far short of the growth need to tackle unemployment, which is running at more than 25 percent, and the consequent social unrest.
As a result of slow growth, tax revenue was below projections while government debt continued to rise, standing at 4.1 percent of gross domestic product (GDP), Nene said.
“We have reached a turning point. Fiscal consolidation can no longer be postponed,” he said, in a nod to the ratings agencies.
Standard and Poor’s lowered South Africa’s sovereign rating to one level above junk status in June, heaping pressure on the government to better balance its books.
The country narrowly escaped a recession in the first half of the year.