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Fiscal Renaissance in a Democratic South Africa

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  • Tania Ajam
  • Janine Aron

Abstract

South Africa has overcome adverse initial conditions to achieve a remarkable fiscal transformation since the 1994 democratic elections, held amid uncertainty about its ability to maintain the rule of law and resist the populist spending pressures. Constitutionally-bases, durable and credible fiscal reforms have contained spending and rendered policy at all levels of government more transparent and accountable, and more predictable through multi-year budgeting. Extensive tax reform and more efficient tax collection has expanded revenue, permitting lower tax rates for both individuals and companies, and personal tax relief. Fiscal consolidation almost eliminated the budget deficit by 2005, and with improved debt management, has created a lower and more sustainable debt burden. While highly centralised revenue raising powers and greater decentralisation of expenditure to sub-national governments created a vertical fiscal imbalance, a strict no-bail out approach helped control provincial spending. The fiscal-monetary policy mix has stabilised the macro-economy and reduced uncertainty, reflected internationally in narrowed sovereign risk spreads and improved debt ratings. However, micro-service delivery in social expenditure has been disappointing (in some cases due to capacity constraints rather than inadequate fiscal allocations). And long-term decline in infrastructure investment and capital stock is only belatedly receiving attention. The challenge is to increase social and infrastructure expenditure at a sustainable rate and to improve the quality of service delivery, to avoid undermining the gains in microeconomic stability.

Suggested Citation

  • Tania Ajam & Janine Aron, 2007. "Fiscal Renaissance in a Democratic South Africa," CSAE Working Paper Series 2007-10, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2007-10
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    File URL: http://www.csae.ox.ac.uk/materials/papers/2007-10text.pdf
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    References listed on IDEAS

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    1. S Berg, 2001. "Trends In Racial Fiscal Incidence In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(2), pages 243-268, June.
    2. Servaas van der Berg, 2007. "Apartheid's Enduring Legacy: Inequalities in Education-super- 1," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 16(5), pages 849-880, November.
    3. Peter Perkins & Johann Fedderke & John Luiz, 2005. "An Analysis Of Economic Infrastructure Investment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 73(2), pages 211-228, June.
    4. Stan Du Plessis & Ben Smit, 2007. "South Africa's Growth Revival After 1994," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 16(5), pages 668-704, November.
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    Cited by:

    1. Charl Jooste & Marina Marinkov, 2012. "South Africa'S Transition To A Consolidated Budget," South African Journal of Economics, Economic Society of South Africa, vol. 80(2), pages 181-199, June.
    2. Stan Du plessis & Ben Smit & Federico Sturzenegger, 2007. "The Cyclicality Of Monetary And Fiscal Policy In South Africa Since 1994," South African Journal of Economics, Economic Society of South Africa, vol. 75(3), pages 391-411, September.
    3. Broadberry, Stephen & Gardner, Leigh, 2014. "African economic growth in a European mirror: a historical perspective," Economic History Working Papers 56493, London School of Economics and Political Science, Department of Economic History.
    4. Kojo Menyah & Yemane Wolde-Rufael, 2012. "Wagner'S Law Revisited: A Note From South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 80(2), pages 200-208, June.
    5. Estian Calitz & Stan Du Plessis & Krige Siebrits, 2011. "An Alternative Perspective On South Africa'S Public Debt, 1962‐1994," South African Journal of Economics, Economic Society of South Africa, vol. 79(2), pages 161-172, June.

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