Just like consumers have to tighten their spending during the cost-of-living crisis, government has to cut spending in the MTBPS.
Wednesday’s MTBPS will affect South African households as government’s austerity measures designed to get the country out of its debt spiral will have severe consequences regarding the delivery of crucial public services.
Neil Roets, CEO of Debt Rescue, says Treasury found itself in trouble after a fall in commodity prices and a deteriorating economy due to ongoing Eskom blackouts and logistics constraints caused mainly by the country’s state-owned logistics company, Transnet. These factors have eaten into the profits of companies that are consequently paying less corporate tax to the government.
Roets is concerned about what the minister’s spending cuts and tax increases will mean for the country’s stability and more importantly, the economic stability of citizens already buckling under the weight of the unsustainable cost of living. “The people who will be most affected are the 18.2 million people in South Africa who currently live in extreme poverty, subsisting on just R760 per person per month or R25 a day.“A third of the nation are currently battling to put enough food on the table, in the face of a cost-of-living crisis, the likes of which we have never seen before. It is deeply concerning that government has not elevated this to the top of the country’s agenda,” says Roets.
“Government must look at the factors that hike the prices of necessities and come up with a plan to mitigate these or we will see these figures rise and rise until soon half the nation is living below the breadline,” Roets warns, adding that far more needs to be done to protect the country’s food security and to manage food prices.”
“This will bring in substantial additional income and will undoubtedly bring the government closer to making up the budget shortfall. The downside is that tax increases reduce the spending power of consumers, leading to lower growth and higher inflation.”
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