South Africa: The Mini-Budget Will Herald a Sea-Change in Government Finances

analysis

As every reformed addict knows, the first step to resolving a problem is to admit you have one. This is because denial is such an important part of addiction. People's ability to deceive themselves is much stronger than even they realise. SA's government finances fall into the same category, which is what makes the mini-budget next week likely to be a sea-change.

Of course, these things are subtle. In previous budgets, the government wasn't exactly denying there was a problem. But there was a kind of minimising approach as if SA had just accidentally tripped over a rock in a long-distance race and would be resuming its sprint in no time.

But now, facing facts, there are rocks everywhere. The key change is that the character of the remedy is different. In the past, Treasury used what might be described as quick fixes to try to stop the bleeding: an increase in excise duty on petrol, or subtly adjusting the rate of compensation for bracket creep.

These fixes gradually got larger and larger, with big increases in personal taxes by the then finance minister Pravin Gordhan in 2017 and finally, the most extreme tax increase of all in 2018, a...

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