The slide of our sovereign credit ratings into sub-investment grade over the past decade has been driven by an underperforming economy weighed down by an electricity deficit, state capture and falling confidence levels from both business and consumers. To have any hope of regaining our investment grade ratings, this placed significant pressure on National Treasury to reign in expenditure especially since Cyril Ramaphosa became president more than three years ago.
It's been a tough battle, but this week we have seen some evidence of the impact of fiscal reforms as the country reported its first quarterly primary budget surplus since 2018, with spending having been brought in line to match revenue.
The state's primary balance swung to a surplus of R9.8 billion or 0.6% of gross domestic product, compared with a deficit of 2.2% of GDP in the first quarter of the year, according to the Reserve Bank's Quarterly Bulletin. A primary surplus suggests the state can extract resources from the economy necessary to service debt. Treasury has shifted focus to make a primary budget surplus its most critical fiscal anchor, instead of a spending ceiling. At a tax conference last week, Edgar Sishi, the acting head of the Treasury budget office said the state was on track to achieve a primary surplus by the middle of this decade.