Finance Minister Tito Mboweni has reiterated his proposal for South Africa’s public representatives to take a 30 percent salary cut.
Speaking during an interview with Bloomberg TV on Tuesday, Mboweni said this proposal is part of the government’s wider efforts to address South Africa’s looming debt crisis.
Reining in govt expenditure
The Minister explained that reining in government expenditure is not just about freezing wage increases for public servants.
He added, “For example, I made a proposal during my Medium Term Budget Policy Statement (MTBPS) that consideration should be given to reducing public representatives’ salaries by at least 30 percent.”
Asked whether or not that would really happen, Mboweni responded, “It is a consideration I have put before the President and Parliament.
“If all of the people involved understand the severity of the situation in which we are in, I’m sure they would accept this. A 30 percent cut in their salaries is nothing compared to the dire circumstances in which we find ourselves.”
The Minister said the private sector has already reduced salaries and retrenched many workers, so “those who have jobs should be grateful that they have jobs and should be willing to reduce their compensation.”
Public representatives include members of Parliament, members of provincial legislatures and councillors. It is unclear at this stage if Mboweni’s proposal cuts across all the three levels.
During his MTBPS, Mboweni said besides “senior” public representatives, the compensation reductions should also apply to “management-level positions, across national, provincial and municipal governments, [and] state-owned entities.”
The Minister warned that if the government fails to adopt “active” measures to rein in runaway debt, South Africa could face a sovereign debt crisis.
“We have to avoid a situation where the debt-to-GDP ratio comes to over 100 percent. That would be a disaster and we would be facing a sovereign debt crisis.
“[This] would be much worse for South Africa because the bulk of government bonds is held by domestic banks and institutions. In the event of a sovereign debt crisis, you are immediately facing a banking crisis,” he explained.