South Africa’s finance minister Enoch Godongwana said on Thursday that achieving fiscal targets by itself will not be enough to draw investment into the country; instead he stressed that higher economic growth is required.
His remarks came after the annual budget indicated the country is positioned for a third consecutive primary budget surplus, a situation where tax receipts exceed non-interest spending, and projected that government debt will peak this year.
"Managing these numerical targets alone is not going to be enough in the absence of growth," Godongwana said.
The minister noted that over the last decade South Africa’s economic growth has averaged under 1%, though activity picked up somewhat in the previous year and is expected to rise further to 1.6% in the current year. He attributed part of the improved fiscal outlook to stronger domestic demand and higher commodity prices, both of which have helped lift government revenue.
Godongwana said the government’s reform agenda has been received positively by investors and expressed the expectation that this reception will eventually result in increased fixed investment. "I think we’re in a better space now to achieve structural reforms and macroeconomic stability, ... I think all of those things will provide a pull factor for private sector investment," he said.
He also told lawmakers that the government is working on a legal "fiscal anchor" - a framework of rules intended to help ensure the sustainability of public finances over the longer term - and that more specifics are expected at a mid-term budget review scheduled for October or November this year.
Asked about his personal plans, Godongwana, who was appointed finance minister in 2021, said he currently had no reason not to complete his term, which runs to 2029.
Contextual notes
- The budget shows a third straight primary surplus and a projected debt peak this year.
- Economic growth averaged less than 1% over the past decade; projected growth is 1.6% this year.
- Improved domestic demand and strong commodity prices have helped boost revenue.