South Africa’s Treasury Says It Will Struggle to Finance Public Services

CAPE TOWN – South Africa will struggle to finance the public services that form the largest part of its budget… due to falling revenues and an economic recession, the National Treasury told lawmakers on Tuesday.

South Africa slipped into recession in the second quarter for the first time in nearly a decade; and the political uncertainty over former Finance Minister Nhlanhla Nene caused turmoil with the SA Rand and financial markets.

“The contraction of our public finances is placing tremendous stress on us and our ability to finance public services and this threatens the affordability of planned expenditure,” Treasury’s Director-General Dondo Mogajane told a parliamentary committee.

Mogajane said Treasury was preparing to implement reforms to enhance growth and would be sticking to the promises it made in the February budget. It was not clear when the reforms would be introduced.

President Cyril Ramaphosa last week appointed Tito Mboweni as the country’s fourth finance minister in two years, replacing Nene who admitted to having meetings with the Gupta family who are at the centre of alleged state corruption.

The move to appoint the former Reserve Bank governor was well received by financial markets, but focus will remain on Ramaphosa’s ability to jumpstart growth, deliver jobs and close the huge budget deficits that have brought the country to the brink of ratings downgrades to junk.

The revenue gap in the 2017/18 fiscal year that runs to end-March ballooned to R50.8 billion ($3.6 billion) as the revenue agency missed Treasury’s collection target, putting pressure on government’s already stretched finances.

Treasury warned in September that it may also see shortfall in revenue collection in the current fiscal year.

Mboweni is due to present the medium term budget speech next Wednesday.

(Reporting by Wendell Roelf; Writing by Mfuneko Toyana; Editing by James Macharia)