TODAY, Minister of Finance, Enoch Godongwana, is expected to table his delayed 2025 National Budget to Parliament.
The next few days are crucial for the country’s near future economic dispensation and for the credibility of the GNU.
No sooner would Godongwana have completed his budget speech, his National Treasury Director-General, Dr Duncan Pieterse, supported by senior Treasury officials, were on hand to reassure investors in a mandated non-deal Global Investor Call arranged by Goldman Sachs International and Investec Bank, alongside their empowerment partners, Vunani Capital Partners and Cinga Capital, no doubt about some of the more controversial aspects of the budget – a rise or U-turn on VAT, clarifications on the Expropriation Bill - the bane of the enemy within – our Afrikaner and/or white supremacist Alt Right and their MAGA supporters in Trumpland, which precipitated a series of anti-South Africa executive actions, and the GNU’s strategy to grow the economy and rein in high public debt, public sector wage inflation, a bloated bureaucracy, and an ever-increasing seemingly unaffordable social safety net cohort.
The fact that the Treasury is following up with a series of in-person fixed income investor update meetings in Cape Town on March 13 and 14, and in Johannesburg on March 28 is revealing. Pretoria is obviously concerned about any potential fallout and impact on South African credit and reputational risk as a result of the Trump Administration’s unfinished business with the country especially over supposed land rights and alleged marginalisation of the White Afrikaners stoked by the likes of his unelected South African-born ‘Secretary of State’ for the Department of Government Efficiency, Elon Musk, and an increasingly minority maleficent Afrikaner lobby in the US Congress.
What is unfortunate is this resort to lobbying through extraterritoriality. It’s happening all over – the UK, EU, Argentina and the Afrikaner lobby in the US. This transcends the usual socio-economic, trade and investment lobbying. In the case of South Africa, its hardcore political interference and outsourcing based on a common ideology bordering on a white supremacist and unfettered market agenda, in which might be not only white but is also right. After apartheid’s collapse in 1994, after centuries of White colonial rule, these groups are still in mourning for the loss of privileges, seemingly usurped by a mainstream establishment neoliberal consensus.
Respected institutions such as The South African Institute of Race Relations (IRR) are also resorting to lobbying through extraterritoriality. The IRR Campaign Manager Makone Maja sent an open letter dated March 5 to the World Bank on ‘South Africa’s constraints to economic growth and overcoming them’, effectively a riposte/footnote to the recently published report by the World Bank, Driving Inclusive Growth in South Africa.
Maja’s sheer chutzpah in extending an open invitation to the World Bank “for further discussions on the socio-economic challenges facing South Africa” betrays her naivety and perhaps inexperience in ways of engaging with the world’s premier multilateral development bank (MDB). These issues were after all extensively discussed in onsite meetings with the National Treasury and the Presidency over the last few months in preparation of the IMF’s 2024 Article IV Consultation with South Africa, which incidentally concluded at the end of January 2025.
Neither the World Bank/IMF, nor any other MDB, or any international sovereign partner or Bloc, or for that matter IRR prescriptions can be panaceas per se for South Africa’s entrenched socio-economic woes, which admittedly are beholden to a troubled history and redemption.
Each entity brings its own political, ideological and institutional baggage, which in the post-War period was dominated by a largely neoliberal consensus that the best way for economies and therefore societies to thrive is through a free market system effectively controlled by the private sector in which the only checks and balances are the regulatory mechanisms adopted by different shades of liberal democratic governments, some with token Keynesian interventionist policies to placate their more radical constituents.
Deregulation, light touch regulation, and poor regulatory oversight, in the latter part of the 20th century contributed much to the various crisis especially the 2008 global financial crisis, aided an abetted by Gordon Geckoesque corporate greed, rating agency deception in which CDOs and other papers were rated ‘AAA’ when they were in reality ‘junk’ bonds backed by useless assets, from which the global economy is still reeling. The World Bank with its nefarious ‘structural adjustment programmes’ was the bane of developing economies, who were beholden to loans and standby facilities often giving rise to the notorious sovereign debt trap.
Democratic South Africa is a mere 30 years old. Last year’s general election was a wakeup call when the ANC lost its absolute majority and was forced into the GNU coalition, which is now into its 10th month. It is still too early to gauge the efficacy of the GNU, but the fault lines are appearing, which is only natural for a 10-party coalition. The DA, the second largest party in the GNU could neither stop the passing of the Expropriation Act nor the NHI Bill – two potentially coalition-busting pieces of legislation.
The delay of the February budget sets a disturbing precedent and exposes the lack of candour, transparency and even trust among the coalition partners. If it were to be repeated in the future it could seriously affect the country’s credit rating and reputational risk, which in turn will increase the cost of finance raised in the international markets. South Africa’s current rating by the Big Three are all at lower end of Investment Grade – Moody's’Ba2’, S&P and Fitch Ratings ‘BB-’ are all regarded as speculative indicating the issuer has a substantial risk of defaulting on some of its obligations.
No doubt credit risk and governance will feature strongly in tomorrow’s (March 13) SA-EU Summit in Cape Town, which will be co-chaired by President Ramaphosa, António Luís Santos da Costa, President of the European Council, and Dr Ursula von der Leyen, President of the European Commission.
In the wake of the Trump shenanigans, Pretoria is in dire need of partners, of which the EU has been a stalwart especially in funding the Just Energy Transition Programme together with the UK and the US.
As for the budget, the choices as IRR suggests, are stark yet simple. Assuming the 2% rise in VAT is abandoned, will Godongwana be tempted to tweak a differential application of the tax, which generally punishes the poorest in society? He could up VAT on specific sectors at the high end of the economy, but there are no winners in this approach. He could cut VAT to 11.5% as IRR Legal’s Gabriel Crouse suggests, but that would exacerbate the low tax intake generally. The country’s subdued GDP growth outlook according to Treasury projections will flatline till the end of the decade; projected contractions in foreign trade and FDI; low near term tax revenue and therefore low tax-to-GDP ratio; high debt services cost projected at R1.341bn over the current term; a burgeoning and some would argue unsustainable social safety net of R1.221bn; a budget deficit flatlining above an average 4%; a bloated public sector wage bill at a whopping 13.6% of GDP (in 2022) – one of the highest in the world, and a “destructive” affirmative action through the BEE policy are all nooses round the neck of the economy. This in turn reduces the fiscal space and Godongwana’s ability to rein in the very metrics above.
For millions of South Africans, the above metrics are meaningless. The danger is that anything short of a reversal of fortunes in their daily lived experience of high prices and cost of living, high jobless especially among the youth, high crime rates, high incidence of gender-based violence et al, could see the country slide into a three-tier society – the brash new wealthy urban elites, the ‘protected’ social net generation, and the rest of the population – muddling through and trying to make sense of it all. The ANC’s founding fathers and the departed contemporary heroes of liberation must be turning in their graves!
Parker is an economist and writer based in London