Southern African countries heave under sovereign debts
By Timo Shihepo
WINDHOEK – SADC member states are battling hard to reduce national debts, which have plagued the economies over the years and have the potential to derail the realisation of regional integration process.
Several countries in the region have recently released their national budgets and sovereign debts have stood out as the most pressing challenges that government are dealing with.
Mozambique leads the way with its national debts totalling R261 billion. The situation is so dire that its debt stock has surpassed its Gross Domestic Product (GDP). Its debt is 80 percent of GDP.
Professor of Economics at the University of Cape Town, Carlos Lopes, weighed in on the Maputo situation describing it as ‘ba’.
“Mozambique is the only country in Africa starting 2017 with something rare – debt stock surpassing GDP and defaulting across the board. This is bad,” said Lopes.
South Africa whose 2017/2018 budget is R1.56 trillion has seen the government debt rise to R2.2 trillion, 50.7 percent of GDP. South Africa’s annual interest payments on debt now amounts to R169 billion.
In his budget speech, South Africa’s Finance Minister, Pravin Gordhan said government debt will stabilise at about 48 percent of GDP over the next three years.
“Interest payments are a rising share of expenditure. By acting now to stabilise debt, we will ensure that future generations will not pay for today’s expenses, 20 or 30 years from now. If we are serious about turning our economy around, we need to get serious about stopping the leakage from our national fiscus,” said Gordhan.
Angola, which was once the darling of Southern African due its oil riches has, has debt estimated at R876.8 billion. Angola’s high level of debt is caused by a spectacular fall in the economy due to mismanagement of the country’s precious resource – oil. Likewise, Zambia’s debt has also been rising and stands at R183.2 billion.
Namibia and Botswana have the least national debts of R66.75 billion and R52.3 billion, respectively.
Namibia’s Finance Minister Calle Schlettwein said “in this uncertain and fragile environment, policies to improve domestic resilience, economic and market diversification, regional integration and national competitiveness are of primary importance for Namibia and the region”.
He said it is good that the South African Rand stabilised, after losing about 30 percent of its value against the US dollar.
The minister added that growth for South Africa and Angola are expected to remain subdued in 2017.
“For Namibia, we prevented debt rising by an additional R4.5 billion and stabilised debt at an about 42 percent of GDP which, without timely corrective action, could have risen to approximately 46 percent of GDP. The total debt stock stood at 40.1 percent of GDP in 2016/17 and rose to 42.1 in 2016/17, or some R66.75 billion,” he said.
However, many countries have introduced measures to curb borrowing, excessive spending that would subsequently result in revenue generation.
South Africa has indicated that for 2017 it will raise an additional R28 billion in tax revenues. The government has also expressed the need to reduce spending by a total R26 billion over the next two years.
Similarly, Namibia, through the ministry of finance, has introduced measures aimed at curbing excessive spending while generating revenue. As a result, Namibia has abolished unnecessary foreign travel by civil servants and cut funds from non-essential projects. Government also cut the national budget by 10 percent last year.
Because of these measures, revenue for the 2017/18 budget year is projected at R56.43 billion, which is 3.5 percent better than estimated in the Mid-Year Budget Review and 9.5 percent year-on-year increase from an estimated R51.51 billion in 2016/17.
In 2016, Zimbabwe paid off 15 years of arrears with the International Monetary Fund, taking the first key step towards restoring its access to international loans.
The country paid off about R1.4 billion (US$108m) due to the IMF, and is now current on all its financial obligations to the IMF.