Zuma Budget Hole Leaves South Africa With Tough Tax Choices

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South Africa may have a new finance minister soon following the replacement of its president, but whoever replaces Malusi Gigaba will still face a 50.8 billion-rand ($4.4 billion) hole in the nation’s finances.

With growth in Africa’s most-industrialized economy lagging that of peers after its second recession in less than a decade, tax collections have dwindled. That’s intensified the difficulty faced by Gigaba at the National Treasury in striking the balance between finding more revenue and not choking off the country’s fragile recovery.

In October, his officials estimated public debt will exceed 60 percent of gross domestic product by 2022. The next month, the government pledged to cut spending by a further 25 billion rand over the next three years to avert another downgrade of its rand debt to junk.

Since then, Moody’s Investors Service has warned it might deliver just such a ratings cut, and an uncosted pledge by former President Jacob Zuma for free higher education for poor students added 12.7 billion rand to the country’s financial needs.


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