A FISCAL STIMULUS FOR SOUTH AFRICA

The paper contends that South Africa's current policy of austerity is economically destructive and proposes a R1 trillion fiscal stimulus over three years. It argues that the country has the fiscal space for expansion because its debt levels are comparable to emerging market peers and its productive capacity is underutilised. Using input-output modelling, the authors estimate an average fiscal multiplier of 1.68, suggesting that a stimulus of 10% of GDP (approximately R500 billion) could generate over R800 billion in economic expansion and nearly 3.5 million jobs. The proposed stimulus is guided by ten principles, including targeting high-multiplier sectors, reducing inequality, and ensuring environmental sustainability through a 'Green New Deal'. Financing is proposed through progressive taxation, rebuilding the capacity of the South African Revenue Service (SARS), leveraging Development Finance Institutions (DFIs), and reforming monetary policy.

• South Africa's economy has experienced a significant downturn, with growth averaging 1.7% between 2011 and 2018 and reaching a decade low of 0.2% in 2019. Unemployment reached 29.1% in Q3 2019, with youth unemployment (15–24 years) at 58.2%.
• The authors argue that the government's austerity measures since 2014/15, intended to reduce debt, have been procyclical and harmful, leading to a collapse in public investment and real cuts to per capita social spending.
• Fiscal space for a stimulus exists because South Africa's debt-to-GDP ratio is in line with emerging market peers and the majority of its debt is denominated in Rands (only 10.1% is in foreign currency).
• The economy is capable of absorbing additional expenditure without causing undue inflation, as evidenced by falling inflation rates and the fact that factories are operating at approximately four-fifths capacity.
• Using a closed input-output model for 2018, the authors find an average fiscal multiplier of 1.68, meaning R1 billion in spending would grow the economy by R1.68 billion and create 6,900 jobs.
• The paper models four stimulus scenarios: a 10% of GDP stimulus (approx. R492.2 billion) is estimated to generate R826.9 billion in income and 3,396,180 new jobs.
• The authors propose a medium-term fiscal stimulus of R1 trillion (7% of 2019 GDP per annum) over three years, which they estimate would annually generate R580 billion in GDP growth and 2.4 million jobs.
• To finance the stimulus, the document recommends progressive tax increases, including taxing wealth, raising income tax on high earners, and closing corporate loopholes, alongside rebuilding the capacity of the South African Revenue Service (SARS).
• The proposal includes a 'Green New Deal' focusing on green industrialisation and renewable energy technologies, particularly in coal mining areas like Mpumalanga, to transition away from fossil fuels.
• The authors suggest that investing in the care economy (childcare, elderly care, and health) would provide high employment multipliers and improve gender equity by reducing the burden of unpaid work on women.

APA

Sibeko, B., & Isaacs, G. (2020). A FISCAL STIMULUS FOR SOUTH AFRICA. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2020/08/A-fiscal-stimulus-for-South-Africa-Final-IEJ.pdf

Chicago

Sibeko, Busi, and Gilad Isaacs. A FISCAL STIMULUS FOR SOUTH AFRICA. Institute for Economic Justice, 2020. https://iej.org.za/wp-content/uploads/2020/08/A-fiscal-stimulus-for-South-Africa-Final-IEJ.pdf.

Wikipedia

{{cite report |last1=Sibeko |first1=Busi |last2=Isaacs |first2=Gilad |title=A FISCAL STIMULUS FOR SOUTH AFRICA |publisher=Institute for Economic Justice |date=June 2020 |url=https://iej.org.za/wp-content/uploads/2020/08/A-fiscal-stimulus-for-South-Africa-Final-IEJ.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sibeko2020fiscal, author = {Sibeko, Busi and Isaacs, Gilad}, title = {{A FISCAL STIMULUS FOR SOUTH AFRICA}}, institution = {Institute for Economic Justice}, year = {2020}, month = jun, url = {https://iej.org.za/wp-content/uploads/2020/08/A-fiscal-stimulus-for-South-Africa-Final-IEJ.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }