We simply cannot continue down the current trajectory, and if the economy is not growing, it would be highly irresponsible to increase spending
FINANCE Minister Tito Mboweni has a tough task this afternoon when he delivers his second Budget speech.
Mboweni will lay out the government’s spending priorities for the next financial year with very little room to manoeuvre, owing to stagnant growth of the economy and various constituencies who are demanding a bigger slice of an ever decreasing budget cake.
South Africans who want to see the results of inaction when it comes to managing an economy need only look at the state of Argentina’s economy.
In the mid-1960s Argentina was the envy of European countries, but populist policies like generous government spending, large wage raises and inefficient production created the perfect conditions for inflation to run rampant.
The sad thing is that Argentinians who weren’t born in the 1970s are still paying for those destructive economic policies, which happened in large part due to the fact that successive governments failed to act.
South Africa does not need to reinvent the wheel; there are numerous lessons we can take from elsewhere and apply to our circumstances.
Consider the fact that the public sector wage bill currently takes up 46% of the government’s tax revenues, which is the largest of all OECD countries, and comes as a result of years of an increasing public sector headcount and above-inflation wage increases.
Eskom has already started the process of culling, but there are many more government departments that should actively be looking at cutting the biggest government expense – wages.
Unions might not like it, but future generations of South Africans will be grateful for the actions taken today to ensure that our country is prosperous.
We simply cannot continue down the current trajectory, and if the economy is not growing, it would be highly irresponsible to increase spending.
That goes for such fancy things as the National Health Insurance, generous bailouts for troubled parastatals and a culture of corruption which feeds off this.
The ANC government’s failure to act will leave it with no other option but to go cap in hand to the International Monetary Fund in Washington for a financial bailout.
And their prescriptions have always been bitter, and destructive to ordinary citizens.