Fiscal Policy in South Africa: From 1994 to now

During the first three decades of post-apartheid South Africa, its fiscal policy deteriorated from healthy to unsustainable. Four phases are identified on the basis of macro fiscal features and in the context of domestic and global politico-economic trends and changing views of the role of government in the economy. Policy measures and outcomes are described, assessed and compared to that of peer countries, with cognisance of the interplay between macro and micro fiscal issues, and stabilisation and structural policies. Policy priorities in the various finance ministers’ budget speeches appear in an appendix. After the post-apartheid government took office in 1994, earlier concerns about public debt and fears of populism were effectively arrested with successful fiscal consolidation (phase 1, 1994-1999) and followed up (phase 2, 2000-2008) with a healthy fiscal track record during and after the country’s longest economic upswing since the second world war. Phase 3 (2009-2020) is described as a fiscal storm, being the result of the impact on the fiscus of the great recession, micro fiscal populism, state capture and the Covid-19 pandemic. The hard-earned investment grade credit rating was lost when foreign government bonds received junk status. The fiscal strategy was not adjusted to the lower economic growth rates and prospects. Eventually the policy focus did shift from mere reliance on growth as a panacea for fiscal sustainability, to direct fiscal reforms, when a fourth phase (consolidation, again) was entered in 2021. The main conclusions are that a major revision is overdue of the economic growth strategy – which should be unambiguously implemented, that government expenditure reprioritisation is imperative to ensure fiscal discipline, and that fiscal sustainability in the final analysis depends on an inseverable umbilical cord between the president and the finance minister, rather than fiscal anchors.