South Africa faces a fiscal cliff, but the government’s two options – either increase taxes or cut expenditure – are unlikely to happen before next year’s election. <\/p>\n\n\n\n
This is according to RMB Chief Economist Isaah Mhlanga, who said that South Africa’s financial woes come amid disappointing tax collections and excessive spending on grants. <\/p>\n\n\n\n
Following the Covid-19 pandemic, demand for goods rose, increasing commodity prices. An assumption was that would be a long-term trend and help commodity-producing countries like South Africa. <\/p>\n\n\n\n
This assumption and better-than-expected tax revenue collections fueled calls for increased spending, which Mhlanga said “drowned out good fiscal management.” <\/p>\n\n\n\n
Although the Social Relief of Distressed (SRD) grant was supposed to only be a temporary relief following the Covid-19 pandemic, it has been extended twice without any revenue source to cover its R35 billion cost in FY23\/24. <\/p>\n\n\n\n
Political leaders have also ignored the National Treasury’s calls to stop the grant. <\/p>\n\n\n\n