Fiscal crossroads require bold, practical reform

South Africa is not merely facing another Budget Speech, but a fiscal crossroads. “Sustained low growth, rising public debt, chronic infrastructure failures and mounting social pressures are converging into a moment that demands clear choices and bold, practical reform,” according to Thys van Zyl, chief executive of Everest Advisory Services. Van Zyl indicated in a letter to Finance Minister Enoch Godongwana his willingness to engage, alongside other professionals, in any serious effort to implement such reforms for the benefit of South Africans.

“In a turbulent global economic climate, amid domestic growth constraints and in the wake of last year’s budget crisis, it is critical that the upcoming Budget Speech restores credibility and emphasises growth-enhancing structural reforms.” Van Zyl believes the central question is not only what will be announced, but whether markets, investors and taxpayers will regard it as executable and sustainable. The Budget Speech will once again attempt to strike a balance between widespread economic pressures and the need to stimulate growth. On the one hand, pressure on public spending continues to rise — particularly in social grants, the public sector wage bill and infrastructure.

On the other hand, revenue collection remains constrained by low growth, which could imply higher income taxes over the longer term. “The question is not only how much is spent, but on what. Core services and maintenance must be protected, growth-enabling infrastructure must be accelerated, and unproductive expenditure must be reduced.

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“Godongwana will likely once again seek to send a clear signal of fiscal discipline, policy certainty and debt stabilisation,” Van Zyl said. “But with public debt already stabilising at elevated levels and interest payments consuming an ever-larger share of the budget, fiscal space is simply limited. “Debt, if used wisely, is a tool for development; if mismanaged, it becomes a trap.

South Africa must ensure that its debt trajectory is compatible with long-term growth and that interest costs do not crowd out essential spending.” Van Zyl further said any deviation from a credible consolidation path could negatively affect the country’s credit ratings and capital flows. “South Africa can no longer afford blanket state guarantees and recurring bailouts. Financing must be linked to clearly defined projects with measurable returns. The private sector stands ready to partner — but this requires predictability, clear rules and a state willing to share responsibility where necessary.

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