THE COST OF AUSTERITY: LESSONS FOR SOUTH AFRICA

The report argues that austerity—defined as fiscal policy aimed at solving debt and growth problems through spending cuts and regressive taxes—leads to economic deterioration, rising unemployment, and increased inequality. It highlights that South Africa is deepening its implementation of austerity despite moderate debt levels compared to international norms. The author contends that these policies undermine constitutionally enshrined rights to health and education and proposes a shift toward a stimulus-based fiscal plan focused on progressive taxation and structural transformation.

• Austerity is defined as fiscal policy implemented by a state to solve debt and growth problems during economic stagnation, but it often results in economic deterioration by depressing tax revenue and spending in both private and public sectors.
• International evidence suggests austerity is self-defeating during recessions because it multiplies the effect of shrinking private-sector expenditure, often leading to a downward spiral of shrinking GDP and increasing sovereign debt.
• In South Africa, average non-interest expenditure growth between 2014/15 and 2018/19 was 1.8%, barely keeping pace with population growth of 1.6%, meaning spending per person on social needs has fallen.
• Austerity in South Africa has negatively impacted basic education, with real spending per learner falling from R17,822 in 2010 to R16,435 in 2017, while 78% of Grade 4 learners cannot read for meaning.
• The public health system in South Africa suffers from underfunding and budget cuts, evidenced by 38,217 unfilled posts reported in May 2018 and a surge in medico-legal claims from R28.6 billion in 2015 to R80.4 billion in 2018.
• South Africa's tax system is insufficiently progressive, with personal income tax rates for high earners falling from 41% in 1997 to 31% in 2018, and corporate income tax dropping from 50% in 1990 to 28% in 2018.
• Corruption and state capture have severely limited resource mobilisation in South Africa, with irregular expenditure remaining high at R51 billion in 2017/18 and significant looting at the Passenger Rail Agency of South Africa (PRASA).
• The report proposes six principles for a new fiscal plan for South Africa, emphasizing stimulus over austerity, progressive taxation, and the need to resolve Eskom's debt crisis by removing over half of its debt from its balance sheet.

APA

Sibeko, B., & Isaacs, G. (2019). THE COST OF AUSTERITY: LESSONS FOR SOUTH AFRICA. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2020/02/The-cost-austerity-lessons-for-South-Africa-IEJ-30-10-2019.pdf

Chicago

Sibeko, Busi, and Gilad Isaacs. THE COST OF AUSTERITY: LESSONS FOR SOUTH AFRICA. Institute for Economic Justice, 2019. https://iej.org.za/wp-content/uploads/2020/02/The-cost-austerity-lessons-for-South-Africa-IEJ-30-10-2019.pdf.

Wikipedia

{{cite report |last1=Sibeko |first1=Busi |last2=Isaacs |first2=Gilad |title=THE COST OF AUSTERITY: LESSONS FOR SOUTH AFRICA |publisher=Institute for Economic Justice |date=October 2019 |url=https://iej.org.za/wp-content/uploads/2020/02/The-cost-austerity-lessons-for-South-Africa-IEJ-30-10-2019.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sibeko2019cost, author = {Sibeko, Busi and Isaacs, Gilad}, title = {{THE COST OF AUSTERITY: LESSONS FOR SOUTH AFRICA}}, institution = {Institute for Economic Justice}, year = {2019}, month = oct, url = {https://iej.org.za/wp-content/uploads/2020/02/The-cost-austerity-lessons-for-South-Africa-IEJ-30-10-2019.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }