Katlego Sekhu
The National Treasury wants to cut South Africa’s spending, but political interference could see ordinary citizens come under more strain. RMB’s Chief Economist and Head of Research, Isaah Mhlanga, joined 959 Breakfast to explain what this means.
Mhlanga notes that “If one looks at what Treasury was expecting at the beginning of the year, the outcome is not what was projected.” He points out that “we have also overspent compared to what we had outlined for spending.”
Mhlanga presented three possible scenarios that might require action from the government, which are, “Cut spending, raise taxes, or do a mixture of the two.” He explains that this is difficult because historically, “it has been difficult for the government to cut spending ahead of an election. It is rather easier to hike taxes, so the government is stuck between a rock and a hard place.”
He further noted that what the government also tends to do in such a predicament is “cut infrastructure spending, as it is not politically difficult.” However, this will negatively affect the economy and will lead to deeper cuts in the future.
Mhlanga propounded, “What this means for South Africans is that there will be less service delivered as the Treasury has to cut that spending. So if they were to cut infrastructure spending, the potholes that you see would remain there for much longer, and potential accidents might happen. Either way, there is a direct cost to me and you. Even if the Treasury says they are not cutting spending, they will have to consider the cost in the future. This is unavoidable,” said RMB’s Chief Economist.
Read Next: Expert sheds light on the growing pattern of earth tremors in Gauteng
We value your feedback:
[vfb id=97]
