The DA’s Responsible Spending Bill will set South Africa on a sustainable fiscal path
21 April 2023
Today marks a crucial milestone in the DA’s efforts to stabilise South Africa's national debt, as the DA’s Responsible Spending Bill is introduced into Parliament.
The proposed legislation aims to introduce a fiscal anchor to address unsustainable debt levels, which are crowding out budgets for basic service delivery. This issue has become increasingly apparent with debt service costs now being the largest expenditure item in the 2023 national budget, amounting to over R 340 billion in interest charges.
If current trends persist, national debt is projected to reach a staggering R 5.84 trillion, or 73.6% of GDP, by 2025/26. The Responsible Spending Bill offers Parliament the opportunity to pass legislation that not only stabilises national finances but also reassures investors of the government's commitment to prudent fiscal management.
The Responsible Spending Bill comprises three key components:
A fiscal rule stipulating that, for the four financial years commencing with the Act's implementation, net loan debt as a percentage of GDP must not exceed the previous year's level.
A mandatory review of the fiscal rule by the National Assembly every four years, starting in 2026/27. The review will involve amending, renewing, or terminating the fiscal rule. The Bill also requires an annual Fiscal Responsibility Report, submitted by the finance minister, detailing compliance with fiscal rules and outlining recovery plans in cases of non-compliance.
The option for the National Assembly to grant exemptions to the fiscal rule for specific financial years upon the finance minister's request, given that valid reasons are presented, and the Standing Committee on Finance endorses the exemption.
As a small open economy, South Africa is vulnerable to external shocks. The Bill's flexibility in allowing exemptions acknowledges this reality, striking a balance between fiscal discipline and adaptability in the face of unforeseen challenges.
By excluding capital expenditure from adjustments and focusing on current consumption expenditure, the Bill implicitly encourages the government to invest in capital projects such as infrastructure development, fostering long-term economic growth and social well-being. This approach demonstrates the importance of balancing short-term fiscal prudence with strategic long-term investments.
It is essential that we avoid burdening future generations with excessive debt without tangible benefits. We call on the ANC and members of Parliament to prioritise South Africa's long-term stability over short-term party objectives and support the Responsible Spending Bill.
The DA eagerly anticipates public participation in the processing of the Responsible Spending Bill. With South Africa's economic health at a critical juncture, this Bill presents an opportunity to set the nation on a path toward sustainable economic recovery.
Issued by Dion George, DA Shadow Minister of Finance, 21 April 2023
