433369666-The-Case-for-Investing-in-South-Africa

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FISCAL POLICY GEARED TOWARDS FISCAL CONSOLIDATION
AND DEBT SUSTAINABILITY
• Government’s fiscal position weakened considerably in recent years, particularly due to the substantial support
provided to financially strained state-owned enterprises (SOEs), especially Eskom, but also due to the impact of
weak economic growth on tax revenues.
• The 2019 National Budget reaffirmed government’s commitment to address South Africa’s fiscal challenges,
while introducing measures to implement structural reforms in support of higher rates of economic growth and
investment. Government is committed to balanced fiscal consolidation, implementing measures to stabilise the
ratio of government debt to GDP and to narrow the budget deficit.
• Government is working on a broad reform programme to strengthen the governance, financial management and
operations of SOEs. These reforms are intended to adjust business models in response to changing economic
conditions, bolster operational efficiencies, enhance investment activity and maximise their impact on the
economy at large. Eskom is the immediate focus in order to reduce the risks it poses to the economy and public
finances.
• Fiscal spending is, therefore, likely to remain constrained, especially over the short- to medium-term. However, a
reprioritisation of public spending for enhanced economic impact, a more effective implementation of localisation
policies and improved efficiencies in payment systems will go a long way in stimulating domestic economic
activity.
• Government's turnaround plan, in line with its commitment to fiscal consolidation and debt sustainability, should
stabilise and restore the fiscal metrics and avoid further sovereign credit rating downgrades.
SOUTH AFRICA’S SOVEREIGN CREDIT RATINGS
Source: National Treasury