South Africa\u2019s central bank chief cautioned the government against relying on windfall taxes from high commodity prices to help service state debt and fund other short-term commitments.<\/p>\n
The tax take in Africa\u2019s most industrialized economy is on course to exceed estimates for a third consecutive year, with the National Treasury allocating 55% of the overrun toward reducing the budget deficit and borrowing requirements through the fiscal year ending March 2024.<\/p>\n
\u201cThe cyclicality of commodity revenues makes them an inappropriate source of continuous funding to meet short-term obligations,\u201d Lesetja Kganyago said during a panel discussion on Thursday.<\/p>\n
\u201cEvery time there is a commodity boom it doesn\u2019t take us long to start a conversation whereby we pretend that we are richer than we actually are.\u201d<\/p>\n
South Africa is the world\u2019s biggest producer of platinum and manganese and a major exporter of gold.<\/p>\n
An index of industrial metals tracked by Bloomberg shows the rally in commodity prices spurred by China\u2019s gradual reopening at the end of 2022 is fading.<\/p>\n
While demand for commodities including iron ore, coal and manganese has remained remain strong, South African shipments are curbed by rail bottlenecks, while production of particularly key platinum-group metals has also been hard hit by rolling power outages.<\/p>\n
The Treasury, which expects tax gains from elevated prices to dissipate, has said \u201cmatching new spending with permanent revenue sources is prudent and responsible fiscal policy.\u201d<\/p>\n
Even so, investors and analysts have raised concerns about the government facing pressure to implement politically popular but unaffordable policies, including the introduction of a basic income grant, before next year\u2019s elections.<\/p>\n