ANALYSTS have warned the government against the use, and possible mismanagement, of the country’s contingency reserves, citing that it would be a “new low and travesty on the future generations that will have to pay for the failure of the current authorities”.
The South African Reserve Bank confirmed last month that there were talks with the National Treasury to find a way to tap into the SARB’s contingency reserves of at least R497 billion to fund the country’s growing budget deficit and public sector salaries.
The director of the Institute for Pan-African Thought and Conversation at the University of Johannesburg, Professor Siphamandla Zondi, said resorting to the reserves would negatively impact future generations.
“The very fact that we have allowed the sovereign debt to rise to such levels as they have is a shame on us and our authorities. The National Development Plan committed the country to 5% economic growth at least, and outlined many ways to do this.
“We have paid lip service to that 11-year plan and as a result, we have expressed a decline in almost all performance indicators.
“Now we have to possibly dip into the reserves to fund basics that should have been funded from revenue generated by the economy. This will be a new low and travesty on the future generation that will have to pay for the failure of the current authorities.
“We need to hear what the plan is urgently to take out of this downward spiral, and to do so quickly, we need bold steps from a courageous leadership, supported by an active citizenry and a strong social compact.”
The senior manager of excise tax and public policy at South African Breweries, Fatsani Banda, warned of mismanagement of the funds.
“The contingency reserves that have previously been used to support failing state-owned enterprises (SOEs), such as SAA, Eskom and Denel, was where all the issues have been, because there has been a continuous financial misuse of the reserves when handed over to SOEs that already suffer from gross mismanagement.
Banda said the contingency reserves should be used positively to wind down public debt, and the National Treasury should be held responsible for that. Hence, there was little room for mismanagement.
“It will be part of their fiscal reporting to ensure the sustainability of the fiscus that this happens. The same would apply to public sector wages. The compensation of public employees is quite a tight process centrally managed by the National Treasury.
“it would be challenging to siphon money into other activities with the level of transparency, at least in the national fiscal planning process.
“However, financial leakages usually happen at the municipal level, SOEs and the biggest occurs through government tenders,” said Banda.
Addressing the media last month, SARB Governor Lesetja Kganyago said: “We are engaged with the Treasury. We have also brought in international expertise to engage on these matters, including how to deal with the capital position of the bank.”
Kganyago declined to name the outside advisers or say when a decision would be made.
The SARB oversees the Gold & Foreign Exchange Contingency Reserve Account on behalf of the Treasury. The account contains unrealised profit or losses on reserves incurred due to exchange-rate fluctuations. Any gains or losses accrue to the government.
Resorting to the contingency reserves has been met with fierce opposition by some of the political parties.
IFP national spokesperson Mkhuleko Hlengwa said it was a reckless move by the Treasury.
“It is a quick fix that is not sustainable in the long term. This is largely due to the government not being able to balance the books as the public sector wage bill continues to grow and debt servicing costs are forecast to grow to almost 80% of GDP by 2025/26.”
ActionSA president Herman Mashaba said the party was opposed to withdrawing from contingency reserves to reduce the state’s debt and fund public-sector wage salaries.
“South Africa finds itself in this difficult position where our debt is increasing exponentially as a result of the governing party’s mismanagement of the economy, and irresponsible management of the fiscus.
“Our public sector wage bill remains bloated, with exorbitant salaries for senior personnel while billions of taxpayers’ money is lost through corruption and fruitless expenditure.”
Mashaba said a change of policy was needed to get the government out of the debt it was facing.
thabo.makwakwa@inl.co.za