Faced with severe tax collection shortfall, swelling budget deficit and a runaway debt-to-GDP ratio, South Africa is considering the sale of some of its state-owned assets. The announcement was made by the minister of finance, Tito Mboweni, ahead of his medium-term budget policy statement. He did not reveal the names of the state-owned companies to be put on the chopping block. South Africa’s tax collection shortfall was reported at R53 billion. It is hoped that the sale of some of its assets would inject the much-needed liquidity into the state’s budget and ease the burden of frequent bailing out of unsuccessful state-owned companies to revive the country’s economic growth
For over a decade, the South African economy has been struggling to recover. The economic decline, partly initiated by the global financial crisis, was accentuated by a failure to implement structural reforms, policy uncertainty and widespread corruption. GDP growth since 2010 has lagged behind at 1.8 percent far below its continental peers of similar market sizes and economic activity. Similarly, South Africa’s debt-to-GDP ratio is currently at 56.7 percent, with projections estimating up to 80 percent in the next decade, at the current trends. GDP growth in February this year was forecast at 1.5 percent but was later revised down to 0.6 percent. The minister admitted that Public expenditure has to be cut down by R250 billion a year in order to bring down the countries debt-to-GDP ratio to an acceptable level.
He added that the country may consider closing or selling SA Express. South African Airways (SAA) and SA Express have been struggling to remain afloat. SAA needs R21 billion to remain in operation, while the government is only willing to extend R5.5 billion to SAA and R300 million to SA Express. The two airlines are currently exploring the possibility of a merger as well as equity buyouts from the private sector.
