'Govt putting all its faith in controlling wage bill like playing roulette'
Kieno Kammies speaks to former chief economist and now economic adviser for Nedbank, Dennis Dykes, to get his key takeaways from the finance minister's 2020 budget speech.
He says many would have preferred Tito Mboweni to focus on reducing wasteful expenditure before homing in on reducing the public wage bill as a cost cutting measure.
The positive and the worrying factor is that they're placing all their faith on the ability to control the wage bill because there's nothing else in terms of tax increases. They do talk about, obviously, wasteful expenditure, fraudulent expenditure, which they've been trying to get a grip on but unfortunately it's been very difficult.Dennis Dykes, Economic adviser - Nedbank
I think everyone, myself definitely included, would prefer that we get rid of fruitless and wasteful expenditure before we start talking about hitting numbers in the public service as well as wage increases in the public service.Dennis Dykes, Economic adviser - Nedbank
It really is a bit of putting all your money on one number in roulette and just hoping that that comes through.Dennis Dykes, Economic adviser - Nedbank
If it doesn't, says Dykes, then government debt is simply going to increase significantly over the next couple of years.
Debt as a percentage of GDP goes from about 61-71%. Obviously that doesn't take into account all the contingent liabilities that we've got at the state-owned enterprises (SOEs) which would then push it well into the 80s, if that all comes home to roost.Dennis Dykes, Economic adviser - Nedbank
There's every chance that Eskom are going to have massive bailouts over the next while because unfortunately the very sad truth about Eskom is they've got stranded assets. A lot of the things that government feels are assets, are actually big, big liabilities and are going to entail massive maintenance costs over the next few years.Dennis Dykes, Economic adviser - Nedbank
He thinks government was correct in not increasing the tax burden at this point; it's more important for Sars to work on bringing tax evaders back into its revenue net.
For more detailed analysis from Dykes, take a listen:
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