Fiscal Space

In the HRV frame, a constraint binds when its shadow price is high: relaxing it would unlock disproportionate growth, and agents throughout the economy are visibly distorting behaviour to work around it. South Africa's fiscal space qualifies on both counts. Debt-service costs now exceed R400 billion annually — more than the health, police, or basic education budgets — and consolidated gross loan debt is tracking above 75% of GDP, a trajectory the 2024 MTBPS conceded leaves almost no room for counter-cyclical response or growth-enhancing public investment. Contingent liabilities at Eskom, Transnet, SANRAL and the Road Accident Fund (whose unaudited accumulated deficit has at times exceeded R300 billion) convert what looks like a stock problem into a recurring flow problem, because each rescue crowds out the capital spending that would lift potential output. Appetite for further tax effort is low after a decade of rising rates against a narrowing base, so the binding margin is on the expenditure and contingent-liability side.

The database ideas cluster, encouragingly, around that diagnosis rather than around austerity. Road Accident Fund Structural Reform and SANRAL Road Funding Model Reform Post E-Tolls both tackle off-balance-sheet fiscal risks whose resolution would restore credibility to the guarantee framework; PPP Regulatory Reform for Social Infrastructure and PMTE Property Portfolio Rationalisation and Revenue Optimisation aim to crowd in private capital and monetise dormant state assets respectively, shifting the financing mix without a tax hike. Running through all of these is a sequencing logic — institutional and regulatory fixes first, so that fiscal relief is structural rather than once-off — and a concern with the quieter entities (RAF, PMTE, SANRAL) whose balance sheets shape sovereign risk more than headline SOEs do. The PEPFAR Funding Transition item is the outlier: a time-boxed quick-win framing of an unavoidable domestic absorption.

Over the next year, watch whether the RAF's accounting qualifications are resolved and whether Treasury's PPP regulations (gazetted in revised form in 2024) actually produce closed deals rather than pipelines; watch the primary balance turning durably positive; and watch whether the sovereign spread over EM peers compresses, which is the cleanest market signal that the constraint is loosening.