Reviewed by Sikelelwa Mfundisi
Photo of Reserve Bank Governor Lesetja Kganyago by News24.
In this article, the author provides a thoughtful analysis of South Africa’s current budgetary issues and the Reserve Bank’s cautions over the dominant African National Congress (ANC) party’s spending practices.
South Africa is experiencing financial problems, and rising interest rates are a result of worsening fiscal concerns, says Lesetja Kganyago, the Reserve Bank’s governor. He stresses that budgetary recklessness could result in higher interest rates, which could discourage foreign investment.
Although inflation has fallen, investors’ concerns about the country’s financial situation have caused government bond rates to soar beyond 12%.
Since tax revenues do not cover government spending, more debt is issued in order to cover the gap. As a result, government bond rates are rising.
There is opposition to austerity measures advocated by the National Treasury to reduce the fiscal deficit. This is especially true since an upcoming election may result in the ANC losing its majority.
There are several challenges facing South Africa, including excessive government spending, a trade imbalance (where imports exceed exports), persistent poverty, wealth inequalities, and high unemployment.
These financial issues will be discussed by the ANC leaders in October. As he presents the budget update in November, other ministers will push for a more liberal approach from Finance Minister Enoch Godogwana.
Since the unemployment rate is still high and a large portion of the population lives in poverty, the ANC is concerned that reducing social expenditure programmes will cause social unrest.
According to Kganyago, financial irresponsibility can lead to higher debt-service costs, which would reduce the amount of money available for vital services.
Due to the upcoming elections, the ANC is at risk of losing control of parliament and having to form coalition partnerships.
It is challenging to strike a balance between budgetary restraints and sustaining key services and jobs at the same time, according to the ANC representative.
The article concludes with a warning from the Reserve Bank against excessive government expenditure in South Africa. Along with the upcoming election, the ruling party faces a conflict between eliminating budget deficits and preserving social programs.
Cele, S. and Thukwana, N. (2023). Reserve Bank warns ANC over spending risks. [online] Business. Available at: https://www.news24.com/fin24/economy/reserve-bank-warns-anc-over-spending-risks-20230923 [2 Oct. 2023].
Daniel Pn. (2023). How to Write an Article Review: Full Guide with Examples | EssayPro. [online] essaypro.com. Available at: https://essaypro.com/blog/article-review. [2 Oct. 2023].