On Monday, the International Monetary Fund (IMF) cautioned South Africa against overly optimistic economic growth projections and budgetary targets.
"The last decade's severe governance issues, including state capture and corruption, have had consequences for South Africa, as highlighted by the 2022 State Capture Commission of Inquiry," the IMF stated in its "Technical Assistance Report: Budget Transparency Assessment in South Africa."
According to an evaluation of budget transparency practices relative to the IMF's Transparency Code, South Africa does not adhere to certain principles, the international financial institution specifies, noting that there are areas needing improvement in budget forecasting and budgeting.
"This involves addressing overly optimistic GDP forecasts, including achieving time-bound or quantified budget targets that support fiscal stabilization and debt, addressing major public investment deficits, and speeding up the approval of budget documents before the fiscal year begins," it explains.
The IMF asserts that stricter oversight of the government's budget plans by existing independent institutions would enhance fiscal credibility. "The Fiscal Transparency Code provides an overview of public investment. In South Africa's case, total multi-year costs are not disclosed in budget documents, a cost-benefit analysis is conducted for major projects but is not systematically published, and there are gaps in the procurement system," it emphasizes.
Additionally, "the budget is presented to Parliament within the two months before the end of the fiscal year, but it is adopted several months after the next fiscal year begins."
Regarding state-owned enterprises, the IMF report also indicates that the national power company "Eskom" remains over-indebted and under-capitalized, due to prolonged underinvestment in the maintenance of existing facilities and new investment infrastructures.
"The concurrent losses over the past years have eroded Eskom's equity and had a negative impact on its cash flows," it notes.
