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

The document argues that South Africa's current budget mismatch is within historical norms and does not constitute an acute fiscal crisis. It identifies a projected revenue shortfall of R67.2 billion and an expenditure overspend of R67.9 billion, attributing the latter largely to poor planning by the National Treasury. While the debt-to-GDP ratio (71.4% in 2022/23) is comparable to emerging market averages, the authors warn that the rising cost of debt and lack of economic growth create a medium-term sustainability risk. To resolve the mismatch without cutting public services, the brief recommends utilizing the R459 billion in the SARB's Gold and Foreign Exchange Contingency Reserve Account, restoring the corporate income tax rate to 28%, removing tax breaks for high-income earners, and implementing a progressive wealth tax.

• South Africa is not currently experiencing an acute fiscal or budget crisis, as the projected budget mismatch is consistent with historical patterns, although the medium-term trajectory is unsustainable without economic expansion.
• The estimated revenue shortfall for 2023/24 is R67.2 billion, primarily driven by under-collection in corporate income tax, value-added tax (VAT), and mining royalties, which together account for over 70% of the gap.
• A projected expenditure overspend of R67.9 billion is expected, with R37.5 billion resulting from a public sector wage bill increase that the authors claim was a predictable outcome of poor planning by the National Treasury.
• 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 that debt levels are not yet at crisis proportions.
• The primary vulnerability in South Africa's debt is the high cost of borrowing rather than the volume of debt; interest payments as a share of GDP rose from 2.2% in 2010 to 4.5% in 2022.
• The government could close the budget mismatch without cost by accessing the R459 billion owed to it 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; a 2018 increase from 14% to 15% yielded R22.3 billion less than the National Treasury's estimate.
• Significant revenue could be raised by removing tax breaks for high-income earners, which are estimated to amount to R305 billion in 2023, with those earning above R500,000 benefiting by R144 billion.
• The implementation of a progressive wealth tax at rates between 3% and 7% could potentially generate between R70 billion and R160 billion in additional revenue.
• The reduction of the corporate income tax rate from 28% to 27% in 2022 is estimated to have cost the fiscus R12 billion in 2023/24, with little evidence that it encouraged investment.

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-policybrief-MTBPS-20231.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-policybrief-MTBPS-20231.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-policybrief-MTBPS-20231.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-policybrief-MTBPS-20231.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }