The President’s ambitious targets are unlikely to be realised should the Minister of Finance deliver a budget that maintains the status quo of budget cuts and a narrow fixation on debt stabilisation as seen through the proposal for a new fiscal rule.
During the State of the Nation (SONA), the President laid out the Government of National Unity’s (GNU) agenda for the next five years, as set out in the Medium Term-Development Plan (MTDP). Among others, the President set a target of 3% GDP growth by 2027 to help address South Africa’s challenges. Such an ambitious target requires a complementary fiscal policy. This is a fiscal policy that maximises the policy tools available to target unemployment, poverty, and inequality. At the same time, fiscal policy must be sustainable so that, among other things, the government can borrow on reasonable terms.
South Africa’s debt trajectory has been concerning and this has implications for its ability to borrow and service debt. The past decade has featured an accelerated rise in debt-to-GDP, higher interest rates on government debt, and a downgrading of our sovereign credit rating. These worrying trends, coupled with low GDP growth have made the National Treasury resort to expenditure cuts to maintain fiscal sustainability. Budget cuts, however, are likely to compromise the GNU’s vision for inclusive growth and to build a capable state. Importantly, the attempt to entrench spending cuts through a binding fiscal rule as a way to stabilise debt will lead to more problems than solutions.
Over the last few years, National Treasury has pursued a primary budget surplus – where revenue is higher than expenditure. In 2024, this was achieved, on the back of historical budget cuts to the social wage and public investment in infrastructure. In addition to this there the MTBPS 2024 committed to stabilising debt for the next ten years. Notwithstanding that our current debt levels are in line with our counterparts, it is not clear at which level will “debt stabilise” and what will be the impact of this commitment on resourcing public goods and services and the economy in the long run. The National Treasury is yet to conduct a human rights impact assessment of this fiscal strategy nor has it provided evidence of its impact on economic growth.
The latest policy brief from the IEJ shows that rather than help address debt concerns, a new fiscal rule would reduce the quality of fiscal policy, whilst further closing democratic participation in the budget-making process.
The brief further shows that:
- Despite their popularity, compliance with fiscal rules is weak. In addition, independent and powerful fiscal institutions are important to facilitate adherence.
- The impact of fiscal rules is mixed; where there seems to be an impact, there is no evidence of a causal relationship between fiscal rules and debt outcomes.
- Growth has been much more effective than fiscal rules in improving debt dynamics.
- Fiscal rules are no substitute for prudent, long-term, consensus-based budgeting.
What should be done?
Previous budgets have not been supportive of the agenda laid by the President and have failed to resource key priority areas. The IEJ proposed six key pillars that should guide South Africa to a sustainable fiscal path. These should be taken up if we are to see a budget that will help realise the vision of the GNU.
These key pillars include; maintaining the social wage expenditure, raising maximum available resources by cutting tax rebates for high-income earners and the wealthy, centering the state in investment to social and economic infrastructure development and not the private sector, targeted spending in key sectors of the economy, and a reviewing of inefficient spending.
Ultimately, the Minister of Finance needs to view the budget as a tool to transform society’s most pressing needs rather than balancing arbitrarily set targets such as debt through imposing a fiscal rule or continued budget cuts. This is counter-productive as it contributes to poor economic growth, and will increase the debt-to-GDP ratio while harming the most marginalised.
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For media inquiries, please contact:
Dalli Weyers | dalli.weyers@iej.org.za | 082 460 2093
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.