Tito Mboweni said his emergency budget would address debt as well as gathering money tot fight COVID-19.
“We have accumulated far too much debt.This downturn as severe as it is will make it worse. Out of every Rand we collect in tax 21 cents will go to paying debt,” says the finance minister.
“This Hippo is eating or children’s inheritence and we have to do all we can to close its mouht.”
“We have flattened the curve and saved many lives. As a farmer will tell you when the storm is raging you have to protect you plants….the storm shall pass,” says Mboweni.
The once mighty South African economy could contract by between 7 and 16 % this year losing more than a million jobs in the process.
“I think we can forget about growth this year and probably next year,” Isaah Mhlanga, the chief economist at Alexander Forbes, told CNBC Africa.
Mboweni has to find at least R130 billion to shore up a gap in finance an a R500 billiion stimulus package to help the South African economy weather the COVID-19 pandemic.
Despite huge spending gap that Mboweni has to bridge t, economist Azar Jammine reckons the finance minister won’t tinker with tax.
“My view is he probably won’t do so. The amount of additional revenue you might collect would be a drop in the ocean, if you think that increasing VAT by one per cent would merely raise R24 billion which is a minute amount compared to what is needed,” says Jammine.
South Africa has been borrowing more than a billion Rand a day to keep the economy afloat through the issue of bonds.
“The question I have is this appetite for buying debt, I think the longer the bonds are issued in these volumes the less the appetite is likely to be,” says Annabel Bishop, the chief economist at Investec.
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent. Sign up here.