COVID-19 and the SA economy in 2020: ‘We need to close the hippo’s mouth’
Finance Minister Tito Mboweni this year noted the biggest contraction in the economy in nearly 90 years and the need to close the gap between government’s income and its spending – the hippo’s wide-open mouth.
CAPE TOWN - All the stresses and strains on the economy played through Parliament this past year. The arrival of the coronavirus on our shores made things only that much worse.
Lawmakers had to rush to approve Finance Minister Tito Mboweni’s February budget, which had no sooner been tabled when Treasury had to craft a new emergency Budget to deal with the crisis unleashed by COVID-19.
After nearly a decade of low growth and rising unemployment, Mboweni was still able to sound positive about growth prospects in his Budget speech in February.
“In 2020, global economic growth is expected to strengthen to 3.3%.
“Global inflation remains contained, global monetary policy is supportive, and we are benefitting from demand for emerging market assets.”
But then came the world’s deadliest pandemic since the Spanish Flu more than 100 years ago – and a lockdown that tripped up the economy and turned the Budget on its head.
Treasury had to put together a new Budget for measures to address the crisis.
Mboweni noted the biggest contraction in the economy in nearly 90 years and the need to close the gap between government’s income and its spending – the hippo’s wide-open mouth.
“This hippo is eating our children’s inheritance and we have to do all that we can to close its mouth. This is our Herculean task.”
Four months later, with the Medium-Term Budget Policy Statement in October, Mboweni had worse tidings. South Africa’s debt stood at 81% of GDP, around R4 trillion. There was a R322 billion shortfall in revenue.
“We think we are now in the danger zone, because any slippage that might happen will easily lead us towards the 100% (of GDP) mark, or even greater than 100% – which means the debt will be greater than the GDP.”
The message was stark. The government must change its ways, or South Africa faced defaulting on its debt, which would give rise to unprecedented turmoil.
WATCH: Mboweni: Government is borrowing at a rate of R2.1 billion per day