Publications
Partners
The significant shortfall in tax revenues announced last week by the SA Revenue Service (Sars) demonstrated that public finances were in “a really precarious situation”, Treasury director-general Dondo Mogajane said.
For this year’s fiscal year, which ended in March, Sars missed the target set in last year’s budget by R57.4 billion, which was the biggest miss since the tax year ending in March 2010 when the agency missed its target by more than R60 billion.
“This is not good for us,” Mogajane said during an interview at the New Development Bank’s fourth annual meeting, in Cape Town.
“It is still early days – we have a new commissioner there. Hopefully Sars will turn around.”
Read: Cut spending and corruption, or get used to tax shortfalls
Mogajane said the Sars’ miss might mean the government budget deficit would widen.
“We will see the effect. [The budget deficit] is a combination of two things. Your savings and underspending – so we will have to work it and see what the real effect is [from the Sars miss] for the 2018/19 fiscal year.”
Mogajane said load shedding was a serious issue for the economy.
“I’m worried about the effect that Eskom [load shedding] will have on general economic growth and the country’s ability to turn itself around. If the power sector was to collapse – imagine what effect that would have on the economy. That for me is a worrying thing.”
Read: SA government hit by R43bn tax shortfall in 2019 tax year
Regarding the possibility of a recession as a result of Eskom power cuts, Mogajane said that generally there were “challenges all over” but it was too early to say if South Africa faced the possibility of a recession, which is defined as two consecutive quarters of negative economic growth.
Regarding Moody’s Investors Service, which late last month left South Africa’s credit rating at investment grade, Mogajane said this was an opportunity for the country to “self correct” and to implement “tough decisions that we think should happen”.
“This is an opportunity for proper, real introspection. Our debt to GDP trajectory is not a good thing that we can write home about.
“On the labour and [government] compensation budget front, we need to do something there. Including the challenges in the power sector – Eskom’s sustainability moving forward, its business model, capital structure – all of those are things that we need to focus on,” said Mogajane.
He said more people needed to come to the party to discuss both the future of Eskom and its finances.
The presidential task team needed to work out a turnaround plan for Eskom, as well as its implementation.
Treasury had committed R23 billion to support Eskom in the next 10 years.
Eskom remained a huge risk for the country’s economy, Mogajane said.
“The story of South Africa is the lack of growth. If we grow – there is no need for us to be doubted.”
In his state of the nation address in February President Cyril Ramaphosa announced that Eskom would be split into three parts: generation, transmission and distribution.
“What we now need to deal with is the actual separation plan.”
Mogajane said there was too much debt – in excess of R400 000 billion – which needed to be dealt with.
“That debt is not sustainable. Eskom is too big to fail,” Mogajane said.
He said to get Eskom working properly “all hands on deck” were needed, including corporate South Africa, the unions, civil society and government.
“We need to take tough decisions on Eskom. We need to be decisive about what needs to happen. Some of those decisions need to be made now.
“There has been talk about addressing the procurement issues at Eskom. If it means renegotiating the price of coal a ton – let’s do it. The coal contractors must come on board. The coal contractors must be prepared to reduce their profits to save [Eskom].
“It means the unions must come on board and address issues on incentives and the pay structure,” Mogajane said, adding that it could mean restructuring and Eskom losing people in the process.
The unions had to take part. It was a challenge because there had to be a plan on the future of those people who would be laid off.
“Business must come forward with its expertise whether in engineering, financial or project management expertise. Government must be decisive – ready to bite the bullet, even if it means closing down some of Eskom’s plants or making other tough decisions.
“All of these things are doable – if all hands are on deck. That is my point.”
“The Eskom challenges are big. Unless we do something extraordinary, we won’t get it right.”
On the topic of Eskom, Mogajane said that the power utility and its power cuts was an issue for the economy.
“I’m worried about the impact that Eskom’s [power cuts, etc] will have on general economic growth and the country’s ability to turn itself around. If the power sector has to collapse – imagine what impact that have on the economy. That for me is a worrying thing.”
Regarding the possibility of a recession as a result of any Eskom power cuts, Mogajane said that generally there were ‘challenges all over’ but it was too early to say if South Africa faced the possibility of a recession, which is two consecutive quarters of negative economic growth.
Regarding Moody’s Investors Service, which late last month left South Africa’s credit rating at investment grade, Mogajane said that this move was an opportunity as a country to ‘self correct’ and to implement ‘tough decisions that we think should happen’.
“This is an opportunity for proper, real introspection. Our debt to GDP trajectory is not a good thing that we can write home about.”
“On the labour and [government] compensation budgets front, we need to do something there. Including the challenges in the power sector. Eskom its sustainability moving forward, its business model, capital structure – all of those are things that we need to focus on.”
“More people must come into the room to discuss both the future of Eskom and its finances. The turnaround plan Eskom as well as the presidential task team – it is implementation time.”
The National Treasury has committed to support Eskom to the tune of R23 billion a year over 10 years.
“The story of South Africa is the lack of growth. If we grow - there is no need for us to be doubted.”
Eskom remained a huge risk for the South African economy, Mogajane said.
In his State of the National Address in February, President Cyril Ramaphosa announced that Eskom would be split into three parts: generation, transmission and distribution.
“What we now need to deal with is the actual separation plan. Secondly, it is on the capital structure of the company – there is too much debt in there – in excess of R400 billion, which we must deal with. That debt is not sustainable moving forward. Eskom is too big to fail.”
“All hands on deck. From corporate South Africa, the unions, civil society and government. We need to take tough decisions in Eskom. We need to be decisive about what needs to happen. Some of those decisions need to be made now.”
“There has been talk about addressing the procurement issues at Eskom. If it means renegotiating the price of coal a ton – lets do it. The coal contractors must come on board. The coal contractors must be prepared to reduce their profits in order to save [Eskom].
"It means the unions must come on board and address issues around incentives and the pay structure. If it means that numbers of people needs to be exited – let the unions come to the party – this is our contribution.
"But we need to have plan around what is going to happen to those people who will be laid off – that is another challenge. Business must come to the party with its expertise whether engineering, financial or project management expertise.”
“Government must be decisive. Decisive in terms of what we are saying. Decisive of biting the bullet. If it means closing down some or making tough decisions around what we do around some of Eskom’s plants.”
“All of these things are doable – if all hands are on deck. That is my point.”
“The Eskom challenges are big. Unless we do something extraordinary – we won’t get it right.”
 |
| ||||||||||||
| |||||||||||||
