The National Treasury’s latest plan to borrow R500 billion per year to fund this year’s budget and refinance the debt it already owes is highly unlikely to benefit SMMEs, three macroeconomic policy experts told Vutivi News.
National Treasury has also said it is considering closing programmes like expanded public works and informal settlement upgrades, increasing VAT, and cutting back on government departments to cover some of the cost of its R143.8 billion budget deficit.
Independent economist Duma Gqubule described the plan as “draconian” and said, “It makes no sense whatsoever”. He said the government should retain all its current programmes and borrow more to fund
SMMEs and economic development because South Africa’s debt was not high by international standards. “In terms of the government’s borrowing, our debt is
not high by international standards despite what Treasury says. Our debt to GDP ratio is 70% even when we benchmark it against our emerging markets. South Africa also has a central bank that can finance economic development. That is what
happened in the world in the wake of Covid-19,” said Gqubule.
He pointed to the fact that during the pandemic, every major economy in the world had a stimulus package, and
the central banks financed 75% of those. Gqubule added that the government had a “huge balance sheet with foreign exchange reserves of R1.2 trillion, way over what we need as a country to cover imports. There are
so many options for the government to use to stimulate this economy and to get it going,” he said.
Entrepreneurship specialist, Dr. McEdward Murimbika of the University of the Witwatersrand’s Business School, said taking out huge new loans without prioritising SMMEs “will potentially lead the government to reallocate its expenditure by cutting back the funding that it already makes available to the SMME sector”. It is difficult to
see where the government would get the funds to service the loans except through re-allocating money and slashing funding to government departments, Murimbika said, adding that “the government has already demonstrated that they are not the most effective nor effective supporter of SMME sector if not one of the biggest impediments”.
Dr Trevor Ngwane, director of the Centre for Sociological Research and Practice at the University of Johannesburg said the problem was not with the government borrowing huge sums of money, but the the fact that it did not direct the funds at SMMEs, particularly survivalist microenterprises. “Government must borrow money to fund development that stops the rich getting richer and the poor poorer. Microenterprises require and deserve financial support, but I doubt that they have been targeted to benefit from the recent round of government borrowing. They should,” said Ngwane.