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Fiscal dimensions of South Africa’s crisis

- Michael Sachs

This paper hopes to shed light on how South Africa arrived at the fiscal crisis that it currently faces.

The Covid-19 pandemic has accelerated this crisis, and discussions are under way about how
government should respond in the short term. The paper tries to focus on the structural factors that
predate Covid-19 and how the fiscal crisis will define public policy over the medium term. To offer
answers to these questions, I review fiscal data and policy development over the last two decades,
in the hope that a better understanding of the road travelled will help illuminate the path ahead.

The structure of public spending and the dynamics of debt accumulation are looked at in some
detail, but less attention given to taxation. The paper considers monetary policy only to the extent
that it might (or might not) ease fiscal constraints. Macroeconomic trends are looked at insofar as
they frame fi scal choices, but the broader context of the South Africa’s crisis – rising unemployment
and poverty, extreme and entrenched inequalities, economic stagnation rooted in deindustrialisation
and fi nancialisation, and the slow but inexorable disintegration of the Congress movement – is left
in the background.

Read the full paper here: Fiscal dimensions