The South African government faces a stark choice: cut back spending or induce a financial crisis.
So says Business Leadership South Africa chief executive, Busi Mavuso.
Writing in Moneyweb, Mavuso argued: ‘There is no option in which spending can somehow increase without putting the solvency of the state at risk.’
It appeared that this reality had not fully dawned on government officials, who kept pushing for even more spending as the country’s budget deficit widened and resources to tap into ran dry.
Mavuso said the government was pushing dangerous narratives, including that government should spend more because ‘it will somehow magically deliver more social spending and growth’. This was simply not true, would instead lead to insolvency’.
‘A state tipping into insolvency is a disaster. From Argentina and Greece to Zimbabwe, it inevitably involves massive disruption to public services, the retrenchment of much of the public sector workforce, and the collapse in value of government debt.
‘That triggers a crisis in the private sector, which is the biggest lender to government.’
She said the view some government officials have that increased government spending would drive growth was self-defeating. If correct, the past decade of ballooning governing spending would have delivered record growth. ‘Instead, we have had ten years of declining GDP per capita’.
The problems are the structure of the economy, failing public enterprises, and crime and corruption.[Image: https://www.blsa.org.za/about-us/the-blsa-board/busisiwe-mavuso/