South Africa's economic landscape is marred by corruption and infrastructure neglect, raising critical questions about the viability of a primary surplus as a developmental tool. This article delves into the structural challenges facing the nation and argues for a more substantial investment in productive economic activities.
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Bleeding national revenue through theft, corruption and wanton neglect of infrastructure should not be tolerated and must be punished.
Equally, the notion that a primary surplus can play a meaningful role in the development of a nation should also be rejected, if not deserving of even harsher criticism.
South Africa’s most recent period of strong economic performance, when unemployment declined and the country achieved annual growth of around 5% for five consecutive years, occurred when it invested the equivalent of at least 25% of its GDP back into the economy each year.
Siphon-based financialisation and mineral extraction alone will not grow South Africa.
This is the economic conversation facing the country 32 years into democracy, where mining and financial services have accounted for up to R9 trillion being siphoned out of the economy, according to the Lehohla Ledger’s Out In economic analysis.
To grow the economy and address unemployment, South Africa needs to invest the equivalent of 50% of its annual tax revenue back into productive economic activity.
Arguing for savings on tax revenue is not economics. It is abracadabra, and Treasury has been playing this Ponzi style casino game for far too long.
South Africa must instead look to its natural assets, particularly mining, and to its sophisticated financial sector to address the structural factors undermining growth, rather than focusing on a minuscule primary fiscal surplus within a tax based budget.
Nowhere in the world has tax revenue alone been responsible for development. As a share of what is required to build and develop a nation, it is simply too small. To seek a primary surplus from that limited resource in order to achieve national objectives is like trying to squeeze fat from a stone.
Nations that develop successfully finance their growth through pension funds, sovereign wealth funds and long term investment vehicles, not through tax revenue alone, important though taxation undoubtedly is.
The celebration surrounding South Africa’s recent primary fiscal surplus is a classic example of winning a battle while decisively losing the war. It reflects the country’s recurring tendency to become excited by flimsy and false economic narratives, even to the point of blaming foreigners for its economic decline instead of confronting the role that capital itself plays in pitting black South Africans against their brothers and sisters from the rest of the continent.
While National Treasury and market commentators may trumpet a primary surplus, which occurs when government revenue exceeds non interest expenditure, as a sign of fiscal discipline, the Lehohla Ledger views this milestone through a far more forensic and diagnostic lens.
When examined beneath the macroeconomic surface, this celebration reveals itself to be a deeply Pyrrhic victory. The structural realities of the South African economy demonstrate that this surplus has been achieved not through sustainable growth, but through structural asphyxiation.
A primary surplus completely excludes the fastest growing component of South Africa’s national budget, namely debt service costs.
By focusing exclusively on the primary balance, the state ignores the reality that it is spending more than R1 billion every day merely to service existing debt.
The Lehohla Ledger argues that when debt service costs outpace GDP growth, celebrating a primary surplus is like a household celebrating that it spent less on groceries while its mounting credit card interest pushes it towards bankruptcy.
The headline figure masks a much deeper structural insolvency.
To achieve this primary surplus, National Treasury has systematically squeezed the life out of public infrastructure investment.
The surplus is the direct result of:
In statistical statecraft, the long term compounding effects of capital expenditure are critical. By suppressing infrastructure spending to balance the books today, the state is actively destroying the future productive capacity of the economy.
A modern economy cannot function effectively when railways are broken, ports are congested and municipalities are collapsing.
This represents fiscal rectitude achieved at the cost of economic vitality.
A significant cushion supporting the recent fiscal framework came from unlocking the Gold and Foreign Exchange Contingency Reserve Account, managed by the South African Reserve Bank.
Paper gains and valuation anomalies → GFECRA drawdown → Artificially reduced borrowing → Primary surplus illusion
This was a substantial, non recurring accounting adjustment.
Drawing down paper gains generated by currency depreciation to make the fiscal deficit appear more respectable does not reflect an economy that is structurally healthy or growing.
It is a once off structural narcotic that temporarily relieves the pain while the underlying disease, namely low growth and weak productivity, remains untreated.
The strongest evidence that this celebration is ultimately Pyrrhic emerges when we move away from aggregate macroeconomic indicators and instead apply the Census Mesh methodology.
When contiguous Enumeration Areas across the 1996, 2001, 2011 and 2022 South African censuses are aggregated, the spatial reality at placename and ward level tells a very different story.
The macro budget may show a surplus, but the granular census mesh reveals an expanding crisis of human capital, including:
When the microdata embedded within the census mesh demonstrates systemic structural regression, a macro level primary surplus becomes an empty and abstract victory.
This analysis is grounded in the forensic diagnostic framework of the Lehohla Ledger, which deploys 2 752 analytical instruments.
These instruments ensure that institutional data is validated through comprehensive metadata, tracking the precise intersection between fiscal policy shifts and the demographic and spatial realities recorded across four successive South African censuses.
Ultimately, the Lehohla Ledger emphasises that an economy cannot borrow its way out of trouble, nor can it starve its way into growth.
Celebrating a primary surplus while the underlying socioeconomic fabric and infrastructure of the country continue to deteriorate is a dangerous illusion.
It may satisfy international ratings agencies in the short term, but it leaves the structural foundations of South Africa profoundly compromised.
Dr. Pali Lehohla is the former Statistician-General of South Africa, Director of the Pan African Institute for Evidence (PIE), and the founder of the Lehohla Ledger. He is a Professor of Practice at the University of Johannesburg and a Research Associate at Oxford University.
Dr. Pali Lehohla is the former Statistician-General of South Africa, Director of the Pan African Institute for Evidence (PIE), and the founder of the Lehohla Ledger. He is a Professor of Practice at the University of Johannesburg and a Research Associate at Oxford University.
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