South Africa’s government is committed to reining in its debt and will avoid a sovereign debt crisis, President Cyril Ramaphosa said.
“I am certain that we will be able to bring our debt levels down and avoid what you could call a debt crisis because we are focused,” Ramaphosa said in an interview Wednesday with Bloomberg Television on the sidelines of an investment conference in Johannesburg. “We have been opening up by telling the nation that we have too much debt and a country that needs to grow needs to reduce its debt.”
Finance Minister Tito Mboweni has repeatedly warned that borrowing has reached unsustainable levels and needs to be reined in. His mid-term budget released last month envisions debt peaking at 95.3% of gross domestic product in the 2026 fiscal year. That’s two years later than forecast in February because the fallout from the coronavirus pandemic has slashed tax revenue.
Fiscal consolidation will hinge on the government freezing wages for its 1.3 million workers for the next three years, a proposition that labor unions have rejected. The Congress of South Africa Trade Unions, the country’s largest labor group, has warned that it may withdraw its electoral support for the ruling African National Congress should the pay proposals not be revised.
Talks with the unions are ongoing and various pay options are under consideration, according to Ramaphosa.
The president also said that the debt-stricken state power utilityEskom Holdings SOC Ltd. is boosting ways to bolster its revenue and improve its debt collection, and that the utility would “continue to function.”
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