South Africa’s finance minister will present the 2018 budget today, in newly instated President Cyril Ramaphosa’s first official act. Mr
South Africa’s finance minister will present the 2018 budget today, in newly instated President Cyril Ramaphosa’s first official act.
Mr Ramaphosa is probably still cursing Jacob Zuma’s name—the economy he’s inherited is currently hobbled by a staggering 27% unemployment rate, with nearly half of South Africans living in poverty. Indeed, the economy is the same size it was nine years ago, despite a period of global expansion. Compounding those woes is a $4.4 billion government deficit, which will be the focus of today’s budget.
Unfortunately for Ramaphosa, the best way to address the revenue gap is with unpopular tax hikes, which could prove problematic ahead of next year’s elections. Indeed, the most effective option available is to raise a sales tax from 1% to 15%, which could plug half the revenue gap alone, but would be highly unpopular and could further exacerbate the poverty situation.
With little option but to implement tax hikes, South Africa’s new leader finds himself in an unenviable position that could see the African National Congress lose power next year for the first time since the end of apartheid in 1994.