By Kopano Gumbi, CNBC Africa reporter
State-owned entities are on the chopping block. The minister of finance, Tito Mboweni says the state will be selling some assets and that discussions are underway to re-evaluate the countries portfolio.
“We have an agreement that we are selling assets but we won’t tell you which ones,” said the minister ahead of his medium-term budget policy statement. He says the government has between now and the budget speech of February 2020 to negotiate which assets will have to be let go. The minister said South Africa needs to have a serious conversation, with no grand standing, if it is to get back on the growth path.
The country currently has a tax collection shortfall of R53 billion and a widening budget deficit. In addition, South Africa is struggling with a runaway debt-to-GDP ratio, which the minister called unsustainably high. Releasing some assets would inject some much needed liquidity into the state’s budget and relieve the burden of constantly bailing out unsuccessful state owned companies.
“Maybe the time has come to consider closing or selling SA Express,” said the minister, “it may be an interesting case study, if in future you want to close something else.” SAA and SA Express have been struggling to remain a going concern. The airline requires R21 billion in order to stay in the sky but the government is only willing to extend R5.5 billion to SAA and R300 million to SA Express.
Public expenditure needs to be reduced by R250 billion a year in order to bring down the countries debt-to-GDP ratio to an acceptable level, the minister advised. But the minister admits that getting to this point would require very decisive actions.