Covid-19 has left 'R300bn hole' in the country's budget, Ramaphosa tells MPs

18 June 2020 - 19:36 By THABO MOKONE
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President Cyril Ramaphosa responding to questions from members of the National Assembly during a virtual sitting on Thursday.
President Cyril Ramaphosa responding to questions from members of the National Assembly during a virtual sitting on Thursday.
Image: ESA ALEXANDER/SUNDAY TIMES

President Cyril Ramaphosa has told parliament that the 83-day national lockdown has left "a R300bn hole" on his government's national budget for this year.

Ramaphosa revealed the shocking figure while responding to questions from members of the National Assembly during a virtual sitting on Thursday.

Meanwhile, finance minister Tito Mboweni has warned that the country is facing a sovereign debt trap by 2024 if it does not change its spending habits soon.

The president conceded that his administration has been running one of the strictest lockdowns in the world since the outbreak of Covid-19 in March, acknowledging that other countries had not banned the sale of alcohol, cigarettes, fast food and other goods.

Ramaphosa was speaking in response to a question from EFF leader Julius Malema.

During the Q&A session, Ramaphosa was attacked by Malema, who suggested to the president that his government had not been relying on scientific advice when taking decisions on the various levels of the lockdown.

"What [type] of scientific advice would advise that a president of a country should address or answer questions in parliament sitting [at] his home next to a fireplace and allow  children to go to school?" said Malema, in remarks that prompted a brief shouting match between EFF and ANC MPs.

Malema also said it was ill-advised of Ramaphosa to ease the lockdown while the number of Covid-19 infections were rising every day.

Ramaphosa told MPs that the national lockdown would see the budget tabled by Mboweni in February shrinking by R300bn as the taxman was now collecting less revenue than projected in February due to the effects of Covid-19.

Mboweni is scheduled to table an urgently revised budget in parliament next Wednesday.

"We've been advised by top scientists in our country and we've also benchmarked what we're doing here against what is happening in other parts of the world," said Ramaphosa.

"Many parts of the world did not do what we did. Our lockdown was hard, we'll concede that. We went on to even restrict things that many other countries did not restrict - like alcohol, like cigarettes and the buying and selling of other items. But we knew that with time, we would not be able to keep the lockdown forever."

On Wednesday night, Ramaphosa announced that various other sectors of the economy would soon return to business under level 3 to further stimulate economic activity.

He then told MPs how the lockdown had ravaged government coffers and warned that many more South Africans would be running out of jobs in the coming months.

"As it is now, as a result of the economy having been closed, the revenue base or the taxes that need to be paid right across the board have gone down, and the big hole that we now have is almost R300bn that we could've had to support services, to support our people," said Ramaphosa.

"It was a sacrifice that we all of us had to make. We've made the sacrifice. Continuing to close the economy would have meant that we completely wipe out the tax base that we've got - and possibly even destroy it because, honourable members, some of the companies will not be able to reopen.

"That's a huge price to pay because it impacts on livelihoods. And we've not yet counted the jobs that we're going lose post Covid-19.

"As we speak now, many people - and I say this with a heavy heart - are going to lose their jobs. It's this that this government needs to manage."

Speaking in the National Council of Provinces (NCOP) on Thursday, Mboweni said the government urgently needed to change its spending plans and habits to avoid a sovereign debt trap in the next four years.

He said the economic effects of Covid-19 meant that the government could no longer afford to finance all its policy priorities.

"We need to avoid borrowing to fund the gap. Why do I say this? Because if we do not do this, this country will be in a situation where the debt-to-GDP ratio is much higher than the GDP of the country.

"In clear, simple terms, that will mean that we're going to be in a sovereign debt crisis [where] we're unable to fund our own budget. That will mean we will have to go to the IMF, who will take over our country."


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