Enoch Godongwana, Minister of Finance. (Photo: GCIS)
South Africa is not simply facing a budget issue, but a fiscal crossroads. This is what Everest Advisory Services warns in the run-up to Finance Minister Enoch Godongwana’s upcoming budget speech on Wednesday.
According to Thys van Zyl, CEO of Everest Advisory Services, the country finds itself in a period where half-hearted adjustments will no longer be sufficient and where fundamental policy choices are unavoidable.
“Continued low growth, rising public debt, chronic infrastructure failures and social pressures come together in a moment that requires clear choices and bold, practical reform,” says Van Zyl.
In a letter to Godongwana, he indicated his willingness to engage with other professionals in any serious effort to implement such reforms for the benefit of South Africans.
Minister Enoch Godongwana (Photo: Jairus Rabbit/GCIS).
“With a turbulent global economic climate, domestic growth constraints and in the wake of last year’s budget crisis, it is crucial that the upcoming budget speech restores credibility and emphasizes growth-stimulating structural reforms,” he says.
According to Van Zyl, the core question is not simply which announcements will be made, but whether they will win the trust of markets, investors and taxpayers.
“The test is not only the content of the budget, but whether it will be considered feasible and sustainable. Without credibility, even the best policy intentions remain just paper.”
Balance between spending and growth
The budget speech will once again try to find a balance between widespread economic pressure and the need to promote growth.
On the one hand, the pressure on government spending is increasing, especially in terms of social grants, the government’s salary bill and infrastructure. On the other hand, tax collection remains under pressure due to low economic growth, which may even necessitate increases in income tax in the longer term.
Archive photo simply to illustrate the national budget. (Photo: Tania Heyns/Maroela Media)
“The question is not just how much is spent, but what. Core services and maintenance must be protected, growth-promoting infrastructure must be accelerated, and unproductive expenses must be cut,” says Van Zyl.
He believes Godongwana will probably want to send out a strong message about fiscal discipline and debt control.
“But with government debt already stabilizing at elevated levels and interest payments gobbling up an increasingly larger part of the budget, the fiscal space is simply limited.”
Van Zyl further emphasized that debt in itself is not the problem, but how it is used.
“Debt, if used wisely, is a tool for development. If it is mismanaged, it becomes a trap. South Africa must ensure that its debt trajectory is compatible with long-term growth and that interest costs do not crowd out essential spending.”
According to him, any deviation from a credible consolidation path can have serious consequences.
“This could negatively affect the country’s credit ratings and capital flows. South Africa can no longer afford general state guarantees and recurring bailouts. Financing must be linked to clear projects with measurable returns.”
He says the private sector is ready to play a bigger role, provided there is certainty.
“The private sector is ready to work together, but this requires predictability, clear rules and a state that is prepared to share power where necessary. This budget should not just be a fiscal document, but an invitation to partnership.
“The private sector has capital, expertise and technical ability, but this requires policy clarity and credible implementation.”
Growth remains the bigger challenge
Even if fiscal discipline is maintained, the bigger challenge remains economic growth.
Current growth forecasts remain below the 2% level – significantly lower than the 3% to 4% threshold that experts say is needed to significantly reduce unemployment.
“At this level, the economy is stabilizing – it is not growing. The budget must clearly outline how fixed capital formation in energy, logistics and manufacturing will be accelerated. Without a noticeable increase in private investment, unemployment will simply remain too high,” says Van Zyl.
He further believes that the budget speech should not stick to general intentions.
“There must be concrete timelines and measurable targets – especially regarding infrastructure, energy expansion and logistics reform. Without clear implementation frameworks, trust will not be restored.”
External risks and policy coherence
According to Van Zyl, the budget must also take into account the broader international context. International trade relations, geopolitical tensions and possible disruption of export markets have direct implications for South Africa.
These factors affect capital flows, the rand and investor confidence.
“Budgetary policy does not stand on its own. It must be linked to structural reforms in energy, logistics and trade, as well as a credible fiscal framework that promotes investor confidence.
“South Africa cannot achieve economic growth while policy uncertainty continues,” he says.
