Governance Accountability Platform
Fiscal Policy Webinar Series
with Prof. Haroon Bhorat
The Brenthurst Foundation and Konrad Adenauer Stiftung host a three-part Fiscal Policy webinar series chaired by Professor Haroon Bhorat, discussing debt, taxes and political economy reform in South Africa.
January 15th - 11:00-12:00h - Our Fiscal Consolidation Path: Is it Feasible?
Prof. Michael Sachs, University of the Witwatersrand
Dr. Thabi Leoka, Private Sector Economist
January 22nd - 11:00-12:00h - Revenue management: What is to be Done?
Prof. Dennis Davis, University of Cape Town
Mr. Ivan Pillay, Independent Consultant
January 29th - 11:00-12:00h - Efficiency of Fiscal Spending, Political Economy of Reform
Andrew Donaldson, University of Cape Town.
Mr. Mcebisi Jonas, Centre for Change
There can be no question that with the onset of the Covid-19 pandemic, South Africa’s macroeconomic environment has changed fundamentally. Nowhere is this pending fiscal crisis more evident than in South Africa’s deficit figures. Prior to the crisis, there was a significant concern around a fiscal Deficit:GDP ratio of 6.83%. The Covid-19 pandemic brought with it the combined shocks to the fiscus of a significant contraction in GDP – estimated at about a 6.6% decline for 2020 – and a huge Covid-19 stimulus package. Indeed, President Ramaphosa’s stimulus package stood at about 10% of GDP, representing the largest Covid-19 response package in the developing world. The fiscal consequence however has been to witness projected deficit estimates to be revised upwards to an eye-watering 15.67%. Provisional results show that South Africa’s Deficit:GDP ratio now ranks as one of the highest in the world, after the United States and Brazil (Sachs, 2020).
It is also clear that the fiscal consolidation path presented in the most recent Budget for 2020/21 – has been met with skepticism from the market, commentators and the policy community. Relatedly, the President’s Economic Advisory Council noted the following:
‘It is however patently not possible to stabilize the debt over the medium term, despite the Minister of Finance’s commitments in this regard – it will take much longer. Even if it were possible, it may not be desirable to force a drastic contraction of spending while the economy is already being battered by the Covid-19 lockdown.” (PEAC Report, October 2020)
Estimates of national expenditure in turn show that about 80% of total expenditure is allocated to the public sector wage bill, interest payments and transfers. Once procurement of goods and services are accounted for, some 2% is left for investment expenditure by the state. Without a dramatic economic growth recovery, a revised fiscal strategy and finally in the short-run some form of an optimised revenue strategy, South Africa is clearly on a rapid path towards a fiscal crisis or debt default.
Haroon Bhorat
Webinar Host, University of Cape Town
Thabi Leoka
Economist, formerly worked for Investec, Barclay's, Standard Bank and Renaissance Capital
Michael Sachs
Adjunct Professor at the University of the Witwatersrand, former head of National Treasury’s budget office
Ivan Pillay
Independent Consultant, former deputy commissioner at the South African Revenue Service (SARS)
Dennis Davies
Former Judge of the High Court, former President of the Competition Appeal Court, Constitutional Law and Tax Law Expert
Mcebisi Jonas
Presidential Investment Envoy, Chairman-designate of MTN, Chairman of The Centre of Change, former Deputy Minister of Finance
Andrew Donaldson
Economist, former Deputy Director-General in the National Treasury and Acting Head of the Government Technical Advisory Centre
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