MINI-BUDGET COUNTDOWN: South Africa keeps its fiscal ship afloat as Trump’s America takes on water

One economy is trying to pull back from a looming fiscal cliff with limited space and has received credit ­ratings upgrades for its efforts at a time when such stamps of approval have become an endangered species on the global stage.

The other is fast becoming a “banana republic” that is marked by rampant incompetence, crime and transparent corruption at the highest levels of a state burdened by surging debt levels with little to show for them.

The first is a rough snapshot of South Africa’s current fiscal state, and the second is a portrait of the “lost Zuma years”. But it is also an apt description of the unfolding train smash that is the second Trump administration in the US.

As Finance Minister Enoch Godongwana prepares to present his annual Medium-
Term Budget Policy Statement (MTBPS) on Wednesday, 21 October, he can perhaps take solace in the steps he and the Treasury have taken to steady the fragile fiscal ship of state while that of the US under President Donald Trump is sinking beneath the waves.

The MTBPS is a blueprint of the fiscal framework and policies for the next three years with projections, and sets the stage for the annual budget in February. And although Godongwana faces headwinds galore, he also has some wind in his sails.

One has come from the rally in gold and platinum group metals (PGM) prices, which has boosted the Treasury’s revenues for the first five months of the fiscal year compared with the same period last year.

“An improvement in revenues has occurred, at 39% of budget versus 37% this time last year, on the rally in precious ­metals prices,” Investec chief economist Annabel Bishop said in a note on the MTBPS.

According to PwC’s latest annual survey of South Africa’s mining sector, income ­taxes paid by the industry in the 12 months to the end of June soared 123% to R53-billion. And increased commodity exports have helped to keep the rand on a relatively stable footing.

The slow road back to fiscal credibility

Godongwana has other tailwinds as well. Since his last MTBPS in November last year, South Africa has received its first credit ­rating upgrades in two decades – a reflection of the Treasury’s efforts against all odds to pull itself out of the deep hole that was dug during the Zuma era.

The trend began in November last year when S&P Global Ratings lifted its South African rating a notch and maintained a positive outlook for future upgrades, citing Eskom’s improved performance and a brightening fiscal and growth outlook. Pointedly, the announcement was made just a couple of days after the 2025 MTBPS was unveiled.

Fitch followed suit in June this year, and Moody’s altered its South African outlook to positive from stable. This means that all of the “big three” ratings agencies have South Africa two notches below the coveted investment-grade status that the country had before Jacob Zuma and his cronies began their looting spree.

Such upgrades are not academic exercises. They lower borrowing costs, making more funds available for government services, and speak to growing international confidence in South Africa’s ability to keep its debt from reaching unsustainable levels.

Among other things, the finance minister needs to make a convincing case on Wednesday that South Africa can stabilise its debt at 80% of its gross domestic product (GDP) within the next two years and bring it down from that peak.

Improvements in the capacity of the South African Revenue Service (SARS) have been a major help on this front. But, ultimately, SARS can only squeeze so much, and positive trends like the precious metals commodity cycle cannot last forever.

Godongwana’s elusive goal for years, going back to when he was the ANC’s main economic policy wonk, has been faster rates of economic growth. If one’s economy, say, grows 5% in one year, one’s revenue will typically increase more than that because of multiplier effects, and the debt-to-GDP ratio – the metric that markets and ratings agencies watch like a hawk – will be significantly reduced.

Alas, South Africa’s economy remains stubbornly stuck in a low-growth trajectory, contracting 0.2% in the second quarter of this year. On Tuesday, 13 October, the International Monetary Fund revised its growth forecast for South Africa for this year down a notch to a woeful 1.0% and projected just 1.3% for next year.

But it noted that this is expected to “improve gradually over the medium term, underpinned by strengthened policy frameworks and ongoing structural reforms”. These include the business-government partnerships that are starting to gain traction on a range of fronts, as well as the slow-motion privatisation and unbundling of Eskom.

“Ultimately, when the financial resources of a country run dry, but the politicians still need to get things done, then they will default to where they can find the resources and skills to do that, and that will be the start of a privatisation drive,” George ­Glynos, head of research at ETM Analytics, told Daily Maverick.

South Africa also managed to get itself removed from the Financial Action Task Force greylist in October 2025, which speaks to efforts to clamp down on criminal activity such as money laundering, although the Madlanga Commission has thrown into sharp relief the gangsterism that still defines much of the state.

But the Treasury under Godongwana can hardly be faulted for effort, and a Madlanga Commission would be unthinkable in the US under Trump, whose maladministration is a squalid saga that makes South Africa at present a beacon of fiscal light.

Gangster state

While South Africa’s Treasury is striving to get its fiscal house in order – in part, it must be said, out of fear of the wrath of the bond markets – Trump has been trashing America’s reputation in the eyes of lenders.

It’s an arresting juxtaposition: Trump has made preposterous claims about “white ­genocide” in South Africa and branded African nations as “shithole” countries. But he’s squatting over a reeking pit latrine he has dug himself.

Take, for example, bond yields. The yields on South Africa’s benchmark 10-year government bonds were down about 20 basis points as of mid-October at about 8.90% compared with a year earlier. US 10-year Treasury notes, by contrast, are up about 120 basis points over the same timeframe, to 5.22%.

“Trustworthy borrowers with solid finances and honest leadership pay less. Distrusted borrowers with disordered finances and corrupt leaders pay more,” senior editor David Frum recently noted in The Atlantic.

“In times past, the United States would have headed that first list. Under President Trump, the United States has tumbled onto the second one. The United States now pays more to ­service its debt than it spends on national defense.”

As Godongwana is busy trying to pull every lever he can to cap South Africa’s mounting debt, the US is in an accelerating debt spiral that is far outpacing its current economic growth rate of 2.3%.

When Trump began his second term last year, the US national debt was $36.2-trillion. In August this year, it shot past the $40-trillion mark despite the chainsaw wielded by Elon Musk. That’s a surge of almost $4-trillion in 19 months.

America’s debt-to-GDP ratio is now approaching 125%, about double its average for the past 75 years. And at current rates of economic growth, it can’t grow its way out of this mess anytime soon.

On top of that, the world’s largest economy is also rapidly becoming a gangster state, and the two – criminality and fiscal decay – go hand in hand. The Zuma era again springs to mind.

The list of Trump’s brazen transgressions and transparent enrichment schemes grows almost daily, and the allegations are well-founded. “During the first year of President Donald Trump’s second term, he amassed more than $2 billion in new wealth. Trump’s cryptocurrency empire, suspiciously timed investments, high-profile pardons, lawsuit settlements, and building projects raise ­concerns that Trump is abusing the presidency for profit,” notes the watchdog American Oversight.

Trump’s company and financial portfolio are not in a blind trust, and what the US president says moves markets. In February this year, he bought ­Boeing stock shortly before he announced China’s purchase of 200 planes from the company – one of more than 28,000 trades he or his money managers has made since he returned to office.

Speaking of Boeings, there was the $400-million one that Qatar “gifted” to Trump last year not long after he brokered a deal to build a luxury golf course in the hydrocarbon-rich emirate. The costs of the security upgrades – paid by the US taxpayer – for the plane are estimated at about $400-million. The Nkandla “security” upgrades, by comparison, were a drop in the fire pool.

Then there are the many pardons Trump has handed out to convicted felons who have benefited him or his inner circle financially. And all this is just the tip of a growing ­iceberg that threatens to hit the titanic US bond market.

The South African state remains plagued by rampant criminality and corruption, and its financial state is indeed precarious. But there are green shoots emerging, and with them the prospect of further ratings upgrades and growing investor confidence in the country’s economy.

The US is on a completely different trajectory, and even the issuer of the world’s reserve currency may soon learn that the bond market takes no prisoners and offers no pardons. DM

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