SA ‘on borrowed time’ for fiscal tightening

SIMON BROWN: I’m checking with Tilmann Kolb, an emerging markets analyst at UBS Global Wealth Management. Tilmann, I appreciate the time today. You put out a note the week before last regarding South Africa being on borrowed time for fiscal tightening. In it you make a couple of really good points. The one is that we have a really poor track record in tackling debt – and in fact National Treasury has largely failed to meet its targets pretty much since 2009, the Covid period aside.

SIMON BROWN: Your average came out there at 108%. Among the issues, for example, in the budget speech this year the minister talked around public wages, and of course we ended up with a 7.5% [increase]. Ahead of an election year, this is going to be a challenge for government notwithstanding, truthfully, a weak track record.

But again, the question is here not about plans but about execution and, as you say, in a year ahead of the election really getting the train going and coming out with big fiscal surpluses is very unlikely. After the election there will be, in our view, an even higher focus on that – that the new government is delivering on being fiscally more restrictive or actually using the fiscal expenses that one has for improving the growth outlook so that this part of the equation is also looking better.

But we also have to acknowledge this was kind of a sampling exercise. We looked at the past, what has happened before, and we just projected that into the future. There are ways that South Africa can try to improve it. There are also global drivers that that can help. Key certainly will be the transition towards more independently produced energy towards increasing the available energy to the South African economy.

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