Government must control spending: deputy minister

(Image: Rod Baker)

"As we continue our counter-cyclical fiscal stance to mitigate the impact of the weak global economy, we must simultaneously control the amount of government borrowing. Failing to do so is likely to result in South African sovereign debt being viewed as increasingly risky," he said yesterday.

Speaking at a National Treasury-World Bank workshop on fiscal policy and inequality, he said the move will increase the cost of borrowing and undermine the other cornerstones of South Africa's fiscal policy.

Jonas said that if South Africa is to address poverty and inequality, it means that it will have to accept some "hard truths". "Poverty and inequality cannot be solved merely through fiscal intervention," he said.

Government has increased its social spending in the past decade with social grants providing a safety net for over 16 million of the county's most vulnerable people.

"Inequality has not shrunk to the extent we would have loved it to. Despite doing so much as a government, the number of poor South Africans remains heartbreakingly high," he said.

Additionally, constraints to growth and unemployment are structural and not cyclical and are due to work stoppages and constrained electricity supply.

"The constraints to growth and unemployment are in fact structural not cyclical. The issues that have constrained our growth thus far such as prolonged work stoppages and constrained electricity supply are not issues that can be addressed overnight or through running wide deficits," he concluded.

Not only must the focus be on microeconomic reforms but the focus must also be on job creation.

"Simply put, the economy must grow at a significant pace and in a manner that creates jobs that absorbs semi-skilled and unskilled people."