GOVERNMENT MUST SHARPEN ITS FOCUS ON MACRO & MICRO ECONOMICS
29 October 2015
It is fair to ask how much President’s Zuma’s oversized and tax guzzling cabinet of 35 Ministers and 37 Deputy Ministers, supported by a bloated bureaucracy, really understand about the intricacies of public finance and macroeconomics. Judging by the glaring ignorance of Minister Gigaba and the very sad fate of our economy under the present cabinet, very little we believe.
At present, the South African Reserve Bank is very worried about the low level of our reserves. It has asked the Zuma administration to increase the country’s gross official reserves, presently standing at R614.9-billion, because the national debt at R1.8 trillion is too high and the reserves much too low to defend the rand if investors started to pull out money in a big way. With such high debt and low reserves, our country does not have the capability to protect the Rand in a market that suddenly becomes very volatile and unpredictable. In our view it utterly reckless of the Zuma administration to put South Africa in such a vulnerable position.
Our national debt went up from 27% of GDP in 2008 to 47% of GDP in March of this year. Even so, Minister Nene wants to borrow an additional R600-billion over the next three years. What is he smoking? Our national debt, within a few days will exceed R1.8-trillion. The cost of servicing this debt eats up over R120-billion per year. By 2017, the cost of servicing the national debt will go up to R157-billion. President Thabo Mbeki would never have allowed our national finances to be in such a parlous state.
The Reserve Bank also warned the government that over indebted households had no protection in the face of a contracting economy. Households were therefore in an extremely vulnerable position. Any massive failure on their part to service their own personal debt could set off events that would damage our country’s financial stability.
We strongly urge President Zuma and his cabinet to attend a month long cram course in macroeconomics so that they can get a grip on the crisis that is building up to overwhelm the country. A cabinet that has little or no understanding of economics is contributing to stagnancy as well as to the accumulation of debt. We certainly don't have the right people in cabinet to look after our economy.
Government must sharpen its focus on macroeconomics as well as microeconomics. Furthermore, it must stop the cycle of endless borrowing with the immoral intention of leaving debt payment to the next generation.
Statement issued by Dennis Bloem, COPE Spokesperson, 29 October 2015
