Six Key Pillars of a Fiscal Framework to Support the MTDP

The Institute for Economic Justice (IEJ) argues that South Africa's Medium-Term Development Plan (MTDP) will fail if the National Treasury continues a "dogma of austerity" focused on debt reduction and primary budget surpluses. The IEJ proposes a fiscal framework based on six pillars: prioritizing unemployment and poverty reduction over debt rules, taxing the wealthy to raise resources, centering the state in infrastructure investment, directing spending toward labor-intensive sectors, maintaining social wage expenditure, and conducting evidence-based spending reviews. The document highlights that current disinvestment in health and education, combined with an overreliance on Public-Private Partnerships (PPPs), undermines human capital and economic growth.

• The IEJ argues that South Africa's current fiscal strategy is dominated by a "dogma of austerity" and a commitment to a primary budget surplus, which leads to cuts in health, education, and social programs like the Social Relief of Distress (SRD) Grant and Presidential Employment Stimulus.
• To address debt, the IEJ suggests moving away from rigid "fiscal rules" and expenditure cuts, noting that South Africa's debt-to-GDP ratio of 75% is comparable to the upper-middle-income average of 73%, though the cost of debt interest (5% of GDP) is significantly higher than the 1.8% to 2.2% average for similar economies.
• The document proposes raising significant revenue by taxing the wealthy, estimating that R250 billion could be raised through high-income earner taxes, resource rent taxes on mining, luxury goods VAT, and a wealth tax of 3% to 7% on the richest 1% (which alone could raise R70 to R160 billion).
• The IEJ advocates for state-led infrastructure investment over Public-Private Partnerships (PPPs), citing evidence from the UK and France where PPP interest rates were significantly higher than government borrowing rates.
• The report suggests that increasing annual infrastructure investment by 1% of GDP could immediately increase GDP by 1.3% and by 2.4% over the following five years.
• The IEJ recommends directing spending toward labor-intensive sectors like manufacturing and construction, noting that light industry (clothing, electronics, plastics) generates more formal employment relative to its value-add than heavy manufacturing (metals and petrochemicals).
• The document highlights a decline in spending per uninsured healthcare user from R4 116.78 in 2024/25 to R3 898.42 by 2027/28 (in 2019/20 rands), arguing that such disinvestment traps the economy in low growth.

APA

Institute for Economic Justice (2025). Six Key Pillars of a Fiscal Framework to Support the MTDP. https://iej.org.za/press-room/statements/statement-six-key-pillars-of-a-fiscal-framework-to-support-the-mtdp/

Chicago

Institute for Economic Justice. Six Key Pillars of a Fiscal Framework to Support the MTDP. 2025. https://iej.org.za/press-room/statements/statement-six-key-pillars-of-a-fiscal-framework-to-support-the-mtdp/.

Wikipedia

{{cite press release |author=Institute for Economic Justice |title=Six Key Pillars of a Fiscal Framework to Support the MTDP |date=4 February 2025 |url=https://iej.org.za/press-room/statements/statement-six-key-pillars-of-a-fiscal-framework-to-support-the-mtdp/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{instituteforeconomicjustice2025six, author = {{Institute for Economic Justice}}, title = {{Six Key Pillars of a Fiscal Framework to Support the MTDP}}, publisher = {Institute for Economic Justice}, year = {2025}, month = feb, url = {https://iej.org.za/press-room/statements/statement-six-key-pillars-of-a-fiscal-framework-to-support-the-mtdp/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }