Cape Town - Finance Minister Enoch Godongwana has defended the R11 billion loan the government received from the World Bank.
Godongwana was briefing the standing committee on finance where he defended the decision on Tuesday.
However, political parties demanded more answers, saying it was unclear what the funds would be used for because the government was saddled with a huge debt.
The parties said the debt-service costs were taking a big slice of the budget and the government could not afford to take another loan.
But Godongwana said the R11bn was part of the R630bn the government hoped to raise on the market this year.
He said the loan from the World Bank came with no conditions.
“When we table the Budget in Parliament, we say a couple things. We say this is the revenue we are likely to raise and we then say this is the expenditure we are going to incur as a nation.
“There is always a difference between those two, which we call the deficit. We go to the market and raise money every year for three things. The first one is to raise money to fund that deficit between the expenditure and revenue. It’s one component of what we borrow. The second component of what we borrow is debt-service costs. The third component of what we borrow is the redemptions,” said Godongwana.
“Your total figure which you go and raise in the market, even this year we are likely to raise about R630bn. If you look at R11bn in the scheme of things it is small. We are likely to raise about R630bn.”
He said that when the government raised money on the market, it approached various development financial institutions, among them the New Development Bank, the African Development Bank and the World Bank.
“We are going to raise money. We go to the market and raise money in order to get the R630bn. Dr Dion George (the DA MP) raises an important point about the fact that our debt service costs are growing, that should worry everyone of us.
“We should be worried about that correctly, as he says it is likely to crowd out service delivery because, as you see now, we are spending more on debt service costs than the entire security cluster combined. We are spending more than the health budget.”
He said they should be concerned about service delivery items in the budget being crowded out by debt-service costs.
He said they should contain debt that was increasing.
But he said it was necessary to go to the market to raise the money.
“Was it necessary? As I indicated, it is necessary. We are going to the market to raise about R630bn. This R11bn is part of what we are raising to achieve those objectives. The necessity is there,” said Godongwana.
Political Bureau