Public Finance and Fiscal Policy in South Africa

Abstract

This chapter explores the trajectory of post-apartheid fiscal policy, focusing on the growth, equity, and sustainability trends between 2009 and 2019. Buoyed by the commodity boom, the African National Congress governing party strengthened fiscal institutions, improving the credibility and solvency of fiscal policy in the first fourteen years after the democratic transition. The decade after the global financial crisis in 2008 saw declining potential growth rates, deteriorating terms of trade, the institutionalization of state capture during the Zuma administration until 2018, policy uncertainty, widespread electricity outages, and a burgeoning public-sector wage bill. Rising deficits, debt, and state-owned-enterprise contingent liabilities triggered austerity without genuine fiscal consolidation. The coronavirus pandemic amplified these unsustainable trends arising from deferred structural fiscal adjustment.