Fitch doubts South Africa's budget will stabilise debt at 76.2% of GDP by FY25, predicting 78.8%. Past failures and DA's weak coalition role add pressure.
South Africa’s government unveiled a revised budget on March 12th, pledging fiscal discipline amid spending pressures, but Fitch, a ratings agency, remains unconvinced. While the plan narrows the gap between official deficit forecasts and Fitch’s own, the agency doubts debt will stabilise as promised. Finance Minister Enoch Godongwana projects debt peaking at 76.2% of GDP in the fiscal year starting April 1st. Fitch, less sanguine, sees it climbing to 78.8% in FY25 from 77% in FY24, and rising further in FY26.
Fitch acknowledges the budget’s intent but warns that its rosier debt trajectory—potentially a boon for South Africa’s sovereign rating—may prove elusive. The government’s track record lends credence to this scepticism. Past budgets have consistently overshot optimistic projections, with debt levels ballooning beyond expectations due to sluggish growth, rising public sector wage bills, and bailouts for state-owned enterprises like Eskom. The latest plan, while trimming a contentious VAT hike, still leans heavily on revenue assumptions that have rarely materialised, leaving analysts wary of yet another shortfall.
Political headwinds add to the strain: most major parliamentary parties have spurned the amended plan, even after it softened a controversial VAT increase. Delays in tabling the budget, sparked by coalition infighting, underscore the challenge. The Democratic Alliance (DA), the second-largest party in the Government of National Unity, has notably failed to wield meaningful influence over the process. Despite its 22% vote share in the 2024 election, the DA’s opposition to ANC-led policies—such as the VAT rise and earlier battles over health and land expropriation bills—has been sidelined. Recent disputes, including the budget’s abrupt postponement in February 2025 after DA resistance, echo a pattern of marginalisation seen in past coalition dynamics, where the ANC’s dominance often reduces partners to mere spectators.
For now, Pretoria’s fiscal consolidation hangs in the balance—optimism tempered by arithmetic and a fractured political landscape.
