Finance Minister delivers grim message on country's debt levels as unemployment reaches 30.1%

21c of every South African tax Rand go towards debt repayment

Finance Minister Tito Mboweni this week gave South Africans a look into what the country's financial situation is, and it's not pretty.

His supplementary budget speech was necessitated by the Covid-19 pandemic - South Africa is only now entering the peak of first wave, with some thousands of new cases daily. The death toll is 2,292 at the moment.

"Debt is our weakness. We have accumulated far too much debt; the downturn will add even more," he said as he warned parliamentarians that the country would have to act now to avoid bankruptcy.

The budget is part of what the minister called the Herculean task of "closing the mouth of the hippo" that would eat everything in its path.

There is a growing budget deficit for 2020/21, 15.7% of the gross domestic product.

30.1% unemployment
This year, South Africa will spend R236.4 billion (12.1 billion euros) to service debt, a figure that has been steadily climbing.

It is estimated that the gross national debt will be close to R4 trillion by the end of the year, the Minister said - 81.8% of GDP, making South Africa a more indebted country than all of its immediate neighbours with the exception of Mozambique.

Added to that is a continued shrinking of the South African economy and concomitant growing unemployment rate: 30.1%, it was announced this week.

"After all," the minister added, "we're not as rich as we were ten years ago."

Weakened restaurant sector
Meanwhile, the restaurant industry is reportedly very frustrated at the lack of legislation that will give them the formal go-ahead to re-open (while other services like hairdressers and tattoo parlours are allowed to re-open).

Reportedly the restaurant industry has been decimated by the lockdown closure. Tobacco sales are still banned since late March, but alcohol sales have been re-allowed.

Against this backdrop, the contribution of the labour-intensive, foreign currency-earning fresh produce industry looks ever more important.


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