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By Jackie Cameron
- SA is on the way to financial crisis – Minister of Finance. South Africa is heading for a budget crisis for fiscal year 2024/25 unless it tackles a widening gap between income and expenses, Finance Minister Tito Mboweni warned. In an emergency budget in June in response to the coronavirus crisis, Mboweni compared the country’s rising debt levels to a hippopotamus that “ate our children’s inheritance.” “A fiscal crisis is on the way for 2024/25 if we do not take serious steps to shut the hippopotamus’ mouth,” Mboweni said in comments posted on the National Treasury’s Twitter account on Friday, Reuters reports. He is scheduled to present an updated plan to fix the economy to Parliament on October 21. Africa’s most advanced economy was in recession before Covid-19 devastated its economy, and the strict government lockdown imposed in late March put great pressure on businesses and households. The lockdown dragged growth to its worst contraction in the second quarter and cost the economy more than 2 million jobs, Reuters says. “Estimates are that revenue for the year will shrink by about 302 billion rand ($ 18.4 billion) and yet the pressure on the spending side is growing,” Mboweni added. “If we are heading towards a fiscal crisis, then we have a sovereign crisis and then a banking crisis. We can no longer live beyond our means ”, he warned.
- Two state entities, Denel and Land Bank, want more support from taxpayers. Land Bank, a struggling state agricultural lender, has asked South Africa for an additional 10 billion rand ($ 603 million) in government support over the next few years. Land Bank, which has already received a state cash injection of R3bn in fiscal year 2020/21, has been in talks with creditors since defaulting on its debt in April. South African state defense company Denel has requested R3.8bn ($ 231m) in state financial support over the next three fiscal years, the National Treasury told Reuters on Friday. Denel, which makes military equipment for South Africa’s armed forces and for export, has struggled to pay wages this year amid a liquidity crisis exacerbated by the coronavirus crisis. State-owned companies have been a long-term burden on the finances of Africa’s most industrialized economy, requiring bailouts at a time of weak economic growth that have helped tilt its sovereign credit rating to “junk” status. South Africa’s National Treasury said last month that the Post Office, public broadcaster SABC and state-controlled airport operator ACSA were seeking a combined ransom of 10 billion rand. Meanwhile, South African Airways is under a form of bankruptcy protection and may be granted more bailouts with a medium-term budget that expires this month.
- The richest countries are working to get the world out of recession. The guardians of the global economy will gather this week under the cloud of worst recession since the Great Depression, and a recovery dependent on scientists finding a vaccine against the coronavirus, Bloomberg reports. The International Monetary Fund and the World Bank will hold their annual meetings, and both will ask the Group of 20 largest economies to extend a freeze on debt payments for the world’s poorest nations that expires at the end of the year. The IMF has been encouraging governments to spend what they need to deal with the crisis, even warning that debt as a percentage of GDP will rise to around 100% for the first time. The G-20 agreed in April to forfeit billions of dollars in repayments from the poorest nations until the end of the year under the Debt Service Suspension Initiative. The World Bank says this is not enough and wants lending to be reduced to avoid further consequences.
- Covid-19 update. Just under 700,000 positive cases have been reported in South Africa, number 11 on the list of the countries most affected by Covid-19 in the world. Just under 17,700 people have died in South Africa from the new coronavirus. More than 37 million cases of Covid-19 have been reported worldwide, with more than 1.07 million deaths. The United States has the highest number, with 215,000 reported dead from the disease. More than 150,000 people have died in Brazil and India ranks third on the list with more than 108,000 deaths.
- A quick lock in performance on the JSE, at the close of the trading week, gold miners dominated the top five moves up, with DRDGold the best performer, gaining more than 7%. Investment firm Ninety One led stocks lower, losing about 5%.
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