Debt consolidation should take place over a longer period to prevent it from being destructive, economist Trudi Makhaya has said.
Makhaya, an economic advisor to President Cyril Ramaphosa, told a webinar on the progress made on the National Development Plan on Thursday morning that debt consolidation shouldn’t be too aggressive and "should take place over a five-year period instead of, as some might prefer, a three-year period" to allow for spending on education and social services to be maintained as far as possible.
"Debt is not bad in and of itself but it’s actually about how we deploy that debt," she said.
"That is the elephant in the room - that we do want to spend in a way that is supportive of a developmental state and a developmental manner, but because we have not been able to do that, we now have this overhang from the past that we need to deal with."
This overhang of debt has not been productive but still had to be paid, she said, even as government wanted to create space for more productive expenditure on infrastructure.
"So what we need to balance is to say how do you make sure that you’re not paralysed by the debt overhang that you have and that you do move on - but at the same time acknowledge that you’re not going to easily raise resources and that you won’t have fiscal sustainability if you don’t deal with that overhang."
National Planning Commissioner and market adviser Miriam Altman said the problem was not the debt levels, projected to exceed 100% of GDP by 2025, but "that we don’t have a grip on it and a clear message".
She said "the answers to the financial problems are all institutional and within our control".
There were a number of steps government could take. These include restoring confidence in the budget process and the fiscal framework, restoring and modernizing revenue collection capability, restoring governance in top infrastructure state-owned entities, strengthening municipal management and finances, charting public sector bargaining to a sustainable result, taking credible action on corruption, and improving the productivity of public spending with more efficient service delivery.