The most striking facts about the trajectory of SA’s economy since the global financial crisis are the
low rate of economic growth and the vast increase in the pile of public debt. These phenomena are
linked in two ways. If economic growth had been higher, more tax would have been collected and
there would have been much less need to borrow in order to fund the gap between revenues and
spending. In addition, faster growth would have meant that the economy was larger, so the ratio of
debt to GDP would have been lower. Slow growth, in other words, is a key driver of the rapid build-up of public debt. But, given the weight of the debt and the rapidity of its increase, lines of causality now work the other way, too: the precarious state of the public finances is one of the reasons why our growth performance has deteriorated, and why it is likely to continue to deteriorate until there is a substantial improvement in our fiscal position. This report, drafted after considerable interaction with many of the country’s leading economists (largely, but not exclusively, from the private sector), sets out the facts about the accumulation of debt, explains its causes, and sets out what South Africa has to do to get out of the trap into which we have fallen. It argues that fiscal consolidation is needed, and that this should be weighted to expenditure reduction rather than tax increases. By itself, however, fiscal consolidation is unlikely to close the gap between revenues and spending unless and until the economy grows more quickly, so it must be integrated into a wider growth strategy.