MPs welcome Gordhan’s debt measures

25 October 2012

MPs have welcomed Finance Minister Pravin Gordhan’s measures to clamp down on South Africa’s public debt, following his tabling of the Medium Term Budget Policy Statement in the National Assembly in Cape Town on Thursday.

African Christian Democratic Party (ACDP) MP Steve Swart said Gordhan had “sent a very strong message to investors and credit rating agencies, that we are following a prudent fiscal path and that we are busy with debt consolidation to reduce our government debt in the long term”.

Swart added that Gordhan had also sent out a strong message on tackling corruption and wasteful expenditure, while managing to stick closely to his Budget forecasts in February.

He described a cover article on South Africa in The Economist last week as “alarmist”, and had failed to take into account President Jacob Zuma’s discussion with business and labour earlier this month, or the fact that South Africa was on course from a fiscal perspective of debt consolidation.

“Yes, there are aspects of our domestic economy that are of a concern, such as the illegal strikes … but I believe in the long run we are going to see a very conservative fiscal policy with a slightly looser monetary policy, which will stand us in good stead,” Swart said.

Democratic Alliance (DA) MP Tim Harris welcomed the spending freeze, which he said would consolidate fiscal consolidation, which is something investors would be pleased to hear.

But he said that South Africa’s deficit was expected to rise to 4.8% this year, which he said was double that of other emerging markets, while the country’s debt ratio of 41% of gross domestic product (GDP) was significantly above other emerging markets, which averaged about 35% of GDP.

Harris added that the government needed to put more emphasis on insuring that reforms and plans that it had come up with – such as the youth wage subsidy – were put into action.

Inkatha Freedom Party (IFP) MP Mario Ambrosini said the middle class would suffer the most with sluggish growth, through higher electricity costs and taxes and higher food prices.

He said South Africa would only get out of its present rut if it addressed ways to increase productivity and developed a sustainable economic growth model that did not depend on subsidies.