![Fact sheet | 8 Things You Need to Know About South Africa’s Fiscal Position [Cover]](https://iej.org.za/wp-content/uploads/2023/10/South-Africas-fiscal-position-8-things-you-need-to-know-fact-sheet-cover.png)
This fact sheet provides an overview of South Africa’s fiscal position, highlighting the need for a balanced, informed response to the country’s economic challenges. It draws on a detailed Policy Brief previously published by the Institute for Economic Justice.
In recent weeks, South Africa’s National Treasury has been advocating for significant budget cuts. They’ve presented South Africa’s fiscal position as a crisis, leaving some to believe that we are on the brink of financial collapse. However, deep cuts to social spending can have detrimental effects on people’s well-being and rights, further straining an already beleaguered public sector. To determine the validity of this fiscal crisis claim and the proposed cuts as a solution, we’ve conducted a comprehensive analysis.
1. Revenue shortfall, but not a collapse
While revenue is anticipated to grow by only 0.55% in 2023/24, missing Treasury’s target by R54.2 billion, this does not equate to a revenue collapse. To put this shortfall into perspective, it’s merely half of what the government collected in revenue in November 2022 alone. Weak performance in the mining industry, continued load shedding issues, and changes in company tax are the primary reasons behind this revenue shortfall. Value-added tax (VAT) also underperformed due to an increase in VAT refunds, attributed to business investments in load shedding solutions.
2. Planned spending and overspending
Government spending will exceed the budget by R67.8 to R105.8 billion in 2023/24, a substantial overspend. The problem arises from the fact that the government only planned for a 1.35% spending increase, which, when accounting for inflation, results in a decrease in real spending per person. The real issue lies in the inadequacy of planned spending, where deficit reduction takes precedence over supporting the population.
3. Long-term structural crisis, not an unprecedented emergency
The term ‘fiscal crisis’ paints a picture of an unprecedented emergency requiring immediate drastic action. In reality, such revenue shortfalls have been common in South Africa, both before and during the Covid-19 pandemic. Cutting spending in response to shortfalls in 2016/17 was followed by even larger shortfalls. It’s concerning that further cuts are considered a solution to the perceived fiscal crisis.
4. Overspending – A political choice and poor planning
A significant portion of the overspend is due to a higher-than-expected public sector wage settlement and unfunded budget submissions for essential social services. National Treasury’s planning inadequacies have contributed to this overspend.
5. Debt and deficit levels not abnormally high
South Africa’s debt levels are not at crisis levels. The debt-to-GDP ratio is in line with emerging market and middle-income country averages. The projected deficit, while higher than previous years, remains comparable to the deficit in 2019/20 and to the average of peer countries.
6. High debt service costs
Although debt levels are not particularly high, South Africa’s yearly debt service costs are relatively high compared to peer countries. This is driven by higher interest rates demanded by investors, a decline in demand for financial assets from emerging economies, and a large share of relatively more expensive long-term debt.
7. No short-term risk of debt crisis, but cuts could increase danger
South Africa’s debt profile lowers its vulnerability to a short-term debt crisis. However, austerity measures without a growth strategy could lead to a future crisis.
8. Treasury’s proposed cuts: A long-term challenge
Rather than rushed budget cuts, we recommend a thoughtful approach that considers the long-term. The government’s fiscal policy should prioritize social and economic development, employment, demand, and poverty reduction. We offer a set of recommendations that align with these objectives.
Amaarah is a Junior Programme Officer in the Rethinking Economics for Africa project. She is currently studying towards her Masters in Applied Development Economics at Wits University. 
Dr James Musonda is the Senior Researcher on the Just Energy Transition at the IEJ. He is also the Principal Investigator for the Just Energy Transition: Localisation, Decent Work, SMMEs, and Sustainable Livelihoods project, covering South Africa, Ghana, and Kenya.
Dr Basani Baloyi is a Co-Programme Director at the IEJ. She is a feminist, development economist and activist. She gained her research experience while working on industrial policy issues in academia, at the Centre For Competition, Regulation and Economic Development (CCRED) and Corporate Strategy and Industrial Development (CSID) Unit.
Dr Andrew Bennie is Senior Researcher in Climate Policy and Food Systems at the IEJ. He has extensive background in academic and civil society research, organising, and activism. Andrew has an MA in Development and Environmental Sociology, and a PhD in Sociology on food politics, the agrarian question, and collective action in South Africa, both from the University of the Witwatersrand.
Juhi holds a Bachelor of Arts degree in International Relations and Sociology from Wits University and an Honours degree in Development Studies from the University of Cape Town. Her current research focus is on social care regimes in the South African context, with a particular focus on state responses to Early Childhood Development and Long-Term Care for older persons during the COVID-19 pandemic. Her other research areas include feminist economics, worlds of work and the care economy.
Bandile Ngidi is the Programme Officer for Rethinking Economics for Africa. Bandile has previously worked at the National Minimum Wage Research Initiative and Oxfam South Africa. He holds a Masters in Development Theory and Policy from Wits University. He joined the IEJ in August 2018. Bandile is currently working on incubating the Rethinking Economics for Africa movement (working with students, academics and broader civil society). 
Liso Mdutyana has a BCom in Philosophy and Economics, an Honours in Applied Development Economics, and a Masters in Applied Development Economics from Wits University. His areas of interest include political economy, labour markets, technology and work, and industrial policy. Through his work Liso aims to show the possibility and necessity of economic development that prioritises human wellbeing for everyone.
Joan Stott holds a Bachelor of Business Science in Economics and a Master’s in Economics from Rhodes University. She brings to the IEJ a wealth of experience in public finance management, policy development, institutional capacity-building, and advancing socioeconomic and fiscal justice.
Siyanda Baduza is a Junior Basic Income Researcher at IEJ. He holds a BSc in Economics and Mathematics, an Honours degree in Applied Development Economics, and is currently completing a Master’s degree in Applied Development Economics at the University of the Witwatersrand. Siyanda’s research focuses on the impacts of social grants on wellbeing, with a particular focus on the gendered dynamics of this impact. His interests include applied micro-economics, policy impact evaluation, labour markets, gender economics, and political economy. He is passionate about translating economic research into impactful policy.
Shikwane is a Junior Programme Officer at IEJ focusing on civil society support and global governance in the G20. He has a background in legal compliance, IT contracting and student activism. He holds degrees in Political Studies and International Relations, as well as an LLB, from the University of the Witwatersrand.
Dr Tsega is a Senior Researcher focusing on Women’s Economic Empowerment within the G20. She examines gender equity in economic policy, with expertise in food systems and small enterprise development. She holds a PhD in development studies from the University of the Western Cape, an MA in Development Economics, and degrees in Development Studies and Economics from UNISA and Addis Ababa University.
Nerissa is a G20 Junior Researcher at IEJ, focusing on advancing civil society priorities within the G20 framework. She bridges data, research, and policy to advance inclusive economic frameworks. She is completing a Master’s in Data Science (e-Science) at the University of the Witwatersrand, and holds Honours and Bachelor’s Degrees in International Relations with distinction. She has worked as a Research Fellow at SAIIA and a Visiting Research Fellow at Ipea in Brazil.
Dr Mzwanele is a Senior Researcher supporting South Africa’s G20 Sherpa with policy research. He holds a PhD in Economics from the University of Birmingham and an MSc from the University of the Witwatersrand. His work covers open macroeconomics, trade, finance, and higher education policy, and he has published widely on inequality, unemployment, household debt and higher education curriculum reform.
Kamal is the Project Lead for IEJ’s G20 work, focusing on sovereign debt and development finance. He holds a BComm (Hons) in Applied Development Economics from the University of the Witwatersrand and an Erasmus Mundus Joint Masters in Economic Policies for the Global Transition. He has worked with SCIS, UNCTAD and co-founded Rethinking Economics for Africa.