The impact of Covid-19 on South Africa’s struggling economy and the tourniquet effect of strict lock-down conditions on sluggish business activity could push the country’s GDP-to-debt ratio to 80%, former newspaper editor and columnist Peter Bruce has said.
Speaking at an Absa-hosted webinar about supply-chain recovery strategies in a post-pandemic world, Bruce, who edited Financial Mail and Business Day in his heyday, said the ratio could be even higher – over 100% – if the government failed to stop spending at the current rate.
“We have to cut debt. You cannot spend money you don’t have.”
According to Bruce South Africa’s budgetary health is a far cry from where it was in 2008 when the GDP-to-debt ratio was around 22%.
Currently sitting at 65%, government lacked the wherewithal to stop debt from snowballing out of control, he argued.
“I’m reluctant to say that it’s a catastrophe or a disaster because we haven’t seen it yet as we’re all locked up.
"But the numbers are horrible and there isn’t really any economic direction or consensus coming through from government because ideology gets in the way of common sense.”
And despite government’s efforts to remedy the situation, in Bruce's view "they cannot fix it.
“The state is not capable of doing its job. It has not become more capable and it has now run out of road.”
Not all was lost though, he added.
“We still have good institutions. The Reserve Bank, Treasury and organisations such as the IDC (Industrial Development Council. We have good, strong markets, and a lot of capable people in the private sector.”
Nevertheless, it was going to take a near miraculous effort from the public and private sector to turn South Africa’s economy around, the popular polemicist stressed.
