MEDIUM-TERM BUDGET POLICY STATEMENT: Is South Africa heading for a ‛fiscal crisis’?

The document argues that South Africa is not in an acute fiscal crisis, as current revenue shortfalls and expenditure overruns are within historical norms. It criticizes the National Treasury's commitment to austerity and poor planning, particularly regarding the public sector wage bill. The authors suggest that the real issue is a 'growth crisis' rather than a debt crisis, noting that the debt-to-GDP ratio is comparable to other emerging markets. To resolve budget gaps, the brief recommends utilizing the SARB's Gold and Foreign Exchange Contingency Reserve Account, increasing borrowing, restoring the corporate income tax rate to 28%, and introducing wealth taxes, while cautioning against VAT increases.

• South Africa is not currently experiencing an acute fiscal or budget crisis, although its medium-term trajectory is unsustainable without economic expansion.
• The estimated revenue shortfall for 2023/24 is R52.4 billion, which is consistent with historical norms from 2017/18 to 2019/20 and is primarily driven by lower collections in corporate income tax, VAT, and mining royalties.
• A projected expenditure overspend between R67.9 billion and R105.8 billion is expected, with R37.5 billion resulting from an unbudgeted public sector wage bill increase.
• South Africa's debt-to-GDP ratio of 71.4% in 2022/23 is aligned with the average for emerging market and middle-income countries (69%), suggesting debt levels are not at crisis proportions.
• The primary concern regarding debt is the high cost of borrowing rather than the total volume, with interest payments as a share of GDP rising from 2.2% in 2010 to 4.5% in 2022.
• The government could close the budget mismatch by accessing the R459 billion in the South African Reserve Bank's (SARB) Gold and Foreign Exchange Contingency Reserve Account (GFECRA).
• Raising VAT is discouraged as it is regressive and historically ineffective; the 2018 increase yielded only R617 million more than would have been projected without the rate hike.
• The document proposes restoring the corporate income tax rate to 28% and removing tax breaks for high-income earners, which are estimated to total R305 billion in 2023.
• Implementing a progressive wealth tax at rates of 3% to 7% could potentially raise between R70 billion and R160 billion in additional revenue.
• Illicit financial flows represent a significant loss to the fiscus, with estimates suggesting the government lost approximately $7.4 billion annually in tax revenue due to trade misinvoicing between 2010 and 2014.

APA

Isaacs, D. G., Mncube, Z., Mdutyana, L., & Ramburuth, K. (2023). MEDIUM-TERM BUDGET POLICY STATEMENT: Is South Africa heading for a ‛fiscal crisis’? Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2023/10/IEJ-fiscal-crisis-policybrief-2023-12-october.pdf

Chicago

Isaacs, Dr Gilad, Zimbali Mncube, Liso Mdutyana, and Kamal Ramburuth. MEDIUM-TERM BUDGET POLICY STATEMENT: Is South Africa heading for a ‛fiscal crisis’? Institute for Economic Justice, 2023. https://iej.org.za/wp-content/uploads/2023/10/IEJ-fiscal-crisis-policybrief-2023-12-october.pdf.

Wikipedia

{{cite report |last1=Isaacs |first1=Dr Gilad |last2=Mncube |first2=Zimbali |last3=Mdutyana |first3=Liso |last4=Ramburuth |first4=Kamal |title=MEDIUM-TERM BUDGET POLICY STATEMENT: Is South Africa heading for a ‛fiscal crisis’? |publisher=Institute for Economic Justice |date=September 2023 |url=https://iej.org.za/wp-content/uploads/2023/10/IEJ-fiscal-crisis-policybrief-2023-12-october.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{isaacs2023mediumterm, author = {Isaacs, Dr Gilad and Mncube, Zimbali and Mdutyana, Liso and Ramburuth, Kamal}, title = {{MEDIUM-TERM BUDGET POLICY STATEMENT: Is South Africa heading for a ‛fiscal crisis’?}}, institution = {Institute for Economic Justice}, year = {2023}, month = sep, url = {https://iej.org.za/wp-content/uploads/2023/10/IEJ-fiscal-crisis-policybrief-2023-12-october.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }