‘’Debt had become a hippo eating their children’s inheritance,” South African finance minister, Tito Mboweni said while speaking at the emergency budget speech, which was held last Wednesday.
Tito aired his blunt opinion on the country’s feeble financial state and accumulated loans that are aggressively threatening the country’s economic growth. The minister who resumed office in October 2018 said “Debt is our weakness. We have accumulated far too much debt; this downturn will add more.”
The finance minister also showed concern for the future of the country by emphasizing that ‘’ debt had become a hippo eating their children’s inheritance.”
His metaphoric speech also placed the responsibility of addressing the debt crises on the government of the country. “Our Herculean task is to close the mouth of the hippopotamus. It is eating our children’s inheritance. We need to stop it now,” said Tito.
South Africa’s economy has been rocky for a while. Last December, the country plunged in a recession, and prior to that, the manufacturing sector was hit hard as a result of the electricity issue at Eskom (electricity distribution company). It is widely reported that Eskom faced problems of mismanagement and corruption amongst other issues.
Unfortunately, the economy of the country took another heavy jab from COVID-19 this year, which has forced the government to adopt various measures which are mostly financial to cushion the macro-economy of the country.
To stay afloat, Ramaphosa’s administration disclosed a $28.86 billion relief package last April, which is equivalent to 10% of SA’s Gross Domestic Product.
SA’s Treasury projected that the supplementation budget would experience an increase in the budget deficit by 14.6% of GDP in the current 2020/21 fiscal year. This would be the highest South Africa has recorded since apartheid rule in 1994.
The consolidated budget deficit, which accounts for spending finance from revenues generated by provinces, social security funds, and public entities was rising to 15.7% of GDP.
Furthermore, the country was forced to reduce its economic growth to 3.75 percent which was last recorded in 1970.
Looking at the economic issues discussed above and the government’s countermeasure of loan acquisition, Tito Mboweni’s advice can be regarded as highly valued, as he holds a colossal pedigree in the financial industry which is backed with years of experience in handling and creating financial policies.
It would be recalled that Mboweni was also the former Governor of the South African Reserve Bank.