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South Africa's Economic Decline: Experts forecast Fiscal Crisis

Published September 21, 2023
9 months ago

Despite repeated assurances from the South African government that the economy was improving, experts believe the country stands on the verge of a fiscal crisis. The government is reportedly spending more than its income, with the blame largely placed on its inept fiscal practices over the last decade.

As per the South African Treasury, effective from September 15, all affected departments and governmental entities will have to halt new recruitments, place a pause on announcing new procurement contracts, and cut back on expenditures, including catering, until the financial conditions of South Africa improve.

This decision follows the August 15 meeting in which the Cabinet acknowledged the deterioration of economic growth compared to the forecasts set in the 2023 Budget. Factors such as increased load-shedding, logistical constraints in freight and port, among others, have significantly impacted the economy.

Political Futures Consultancy's Director and economic expert, Daniel Silke, highlighted government mismanagement, corruption, misuse of tax income, and poor policy choices as the chief reasons for the present fiscal scenario. As the election campaign season commences, he warned of a looming lending crisis due to insufficient government funds.

South Africa's rising debt-to-GDP ratio poses a potential threat to financial stability, which may linger not just for the next year but for many future years. Silke has relayed Reserve Bank's urgent message to the government to slash expenditure where possible.

On the other hand, Thokozile Madonko, a senior researcher at the Southern Centre for Inequality Studies at Wits University, agreed to the crisis, highlighting the weakening micro-fiscal conditions and emphasizing structural reforms in taxation to counterbalance the increasing debt service costs.

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