SA Advances Fiscal Reform and Structural Overhaul Amid OECD Review

In a bid to fortify fiscal discipline and sustain long-term economic growth, the National Treasury of South Africa has initiated consultations for the adoption of a formal fiscal anchor, aimed at averting the recurrence of high government spending, budget deficits, and rising public debt. This proposal was detailed in the March 2025 discussion document, as part of a broader national strategy to improve fiscal governance and boost economic resilience.

The announcement was made by Deputy Finance Minister Ashor Sarupen on Thursday during the launch of the OECD Economic Survey of South Africa in Johannesburg—a key moment aligning domestic policy reform with international recommendations.

Efficiency Reforms and Debt Control at the Core of Treasury Agenda

Deputy Minister Sarupen emphasized the government’s active steps to enhance fiscal efficiency, including:

• Closing underperforming programs

• Eliminating ghost workers via advanced payroll systems

• Establishing a centralized state-owned holding company to improve oversight and transparency

He noted that tax administration improvements—through enhanced data systems and compliance frameworks—are already contributing to improved revenue collection.

The formal fiscal anchor under consideration would serve as a guiding framework for responsible fiscal policy, similar to rules adopted in other middle-income economies, ensuring spending discipline and greater policy predictability.

OECD Survey Aligns with Government’s Reform Priorities

The Organisation for Economic Cooperation and Development (OECD) presented its latest Economic Survey of South Africa, a comprehensive peer-reviewed report assessing the country's macroeconomic health, governance, and structural reforms.

The OECD’s five key recommendations include:

1. Enhancing fiscal sustainability while promoting inclusive growth

2. Maintaining low and stable inflation

3. Expanding employment and labour force participation

4. Advancing a just climate transition

5. Reforming the electricity sector

Minister Sarupen noted the strong alignment between these recommendations and South Africa’s ongoing reforms.

He reaffirmed the government’s social commitment, highlighting that 61% of non-interest expenditure is dedicated to the social wage, including education, healthcare, and social protection—ensuring vulnerable populations remain supported, even as spending efficiencies are pursued.

R1 Trillion Infrastructure Investment Signals Bold Growth Strategy

To drive economic transformation and inclusive development, the government has earmarked over R1 trillion in infrastructure investment over the medium term, targeting:

• Energy

• Transportation

• Water infrastructure

These investments are crucial not just for service delivery, but also for enabling job creation, youth employment, and technical skills development. The state is also expanding support for informal sector businesses, ensuring wider economic participation.

Operation Vulindlela Phase 2: Deepening Structural Reforms

The government’s flagship reform initiative, Operation Vulindlela, jointly managed by The Presidency and National Treasury, has now entered Phase 2, with a sharper focus on:

• Expanding digital infrastructure

• Enabling dynamic, well-managed cities

• Improving basic municipal services

Key components include:

• Utility model transition for water and electricity services to improve financial sustainability

• Municipal funding model reform to better align electricity revenues with infrastructure investment

• Scaling digital connectivity and e-governance

This reform package reflects OECD recommendations on local government capacity and financial viability.

Electricity Sector Reform: A Turning Point for Energy Security

A critical focal point of both the government and the OECD is the energy sector. Minister Sarupen noted that load shedding has significantly declined, thanks to improvements in generation capacity, the rise of embedded generation, and accelerated procurement processes.

Key milestones include:

• The operationalisation of the National Transmission Company South Africa (NTCSA), a pivotal step in the unbundling of Eskom

• Strengthening investment in transmission networks

• Growing the role of independent power producers (IPPs)

• Plans to establish a competitive wholesale electricity market

Looking ahead, the government aims to:

• Fully restructure Eskom

• Create an independent transmission system operator

• Facilitate a just energy transition as part of South Africa’s global climate commitments

Inclusive Growth and Climate Alignment

The Deputy Minister stressed that while fiscal consolidation is essential, it must go hand in hand with inclusive economic growth and climate resilience. These twin goals form the foundation of South Africa’s reform agenda.

Sarupen concluded that the government remains resolute in building a capable, responsive state, aligning national policies with international best practices, and ensuring the country’s trajectory is both economically inclusive and environmentally sustainable.