Key Takeaways
- South Africa’s Treasury, led by Finance Minister Enoch Godongwana, is steering the country back toward fiscal credibility after years of mismanagement under the Zuma administration.
- Recent credit‑rating upgrades from S&P, Fitch and Moody’s reflect improved revenue performance—particularly from a rally in gold and platinum‑group metals—and stronger tax collection by SARS.
- The Medium‑Term Budget Policy Statement (MTBPS) aims to stabilise debt at ≈ 80 % of GDP within two years, a goal challenged by persistently low economic growth (IMF forecasts 1.0 % for 2024 and 1.3 % for 2025).
- Structural reforms, including the gradual privatisation and unbundling of Eskom and South Africa’s removal from the FATF greylist, are bolstering investor confidence despite lingering corruption and criminality.
- In stark contrast, the United States under Donald Trump’s second term is experiencing a rapid debt surge, rising bond yields and allegations of self‑enrichment, pushing its debt‑to‑GDP ratio toward 125 % and eroding its reputation as a trustworthy borrower.
- The divergent trajectories highlight how sound fiscal management and institutional reforms can rebuild market trust, while unchecked corruption and fiscal indiscipline accelerate a nation’s financial decline.
Fiscal Outlook and the Medium‑Term Budget Policy Statement
Finance Minister Enoch Godongwana is set to present South Africa’s Medium‑Term Budget Policy Statement (MTBPS) on 21 October 2024, a three‑year fiscal framework that precedes the February national budget. The MTBPS outlines revenue projections, expenditure plans and the path the government intends to take to bring public finances back to a sustainable trajectory. Although Godongwana confronts numerous headwinds—sluggish growth, elevated inflation and political uncertainty ahead of local elections—he also benefits from several tailwinds that have emerged since his last MTBPS in November 2023. The statement therefore serves both as a diagnostic of the current fiscal health and as a roadmap for restoring confidence among domestic and international investors.
Revenue Boost from Commodity Prices
One of the most significant tailwinds has been the rally in gold and platinum‑group metals (PGM) prices, which has lifted Treasury revenues for the first five months of the fiscal year. According to Investec chief economist Annabel Bishop, revenues reached 39 % of the budgeted amount versus 37 % in the same period last year, a direct result of higher commodity earnings. PwC’s annual survey of South Africa’s mining sector corroborates this trend, showing that income taxes paid by the industry jumped 123 % to R53 billion in the twelve months to June 2024. The surge in commodity exports has also helped keep the rand relatively stable, providing a modest buffer against external shocks and giving the government additional fiscal space to meet its obligations.
Credit‑Rating Upgrades and Their Implications
Since the November 2023 MTBPS, South Africa has secured its first credit‑rating upgrades in two decades—a notable achievement given the country’s deteriorated fiscal reputation during the Zuma era. S&P Global Ratings lifted the sovereign rating by one notch and maintained a positive outlook, citing Eskom’s improved performance and a brightening fiscal‑growth horizon. Fitch followed suit in June 2024, while Moody’s shifted the outlook from stable to positive. Consequently, all three major agencies now place South Africa two notches below the coveted investment‑grade status it enjoyed before widespread looting under Jacob Zuma. These upgrades are not merely symbolic; they lower borrowing costs, expand the pool of funds available for public services, and signal growing international confidence that the government can keep its debt trajectory from becoming unsustainable.
Challenges: Low Growth and the Debt‑to‑GDP Target
Despite the positive momentum, Godongwana faces a stubborn obstacle: South Africa’s economy remains mired in low growth. The IMF revised its 2024 growth forecast down to 1.0 % (from a previous 1.1 %) and projects just 1.3 % for 2025, noting that any improvement will be gradual and contingent on strengthened policy frameworks and ongoing structural reforms. The finance minister’s long‑standing ambition—to achieve faster economic expansion that would boost revenues through multiplier effects—has yet to materialise. Consequently, the debt‑to‑GDP ratio, which markets and rating agencies monitor closely, remains a pressing concern. Godongwana must convince stakeholders that the country can stabilise debt at roughly 80 % of GDP within two years and then begin a gradual decline, a target that hinges on both revenue enhancement and expenditure discipline.
Structural Reforms, Eskom and the FATF Delisting
To bolster growth prospects, the Treasury is advancing several structural reforms. Chief among them is the slow‑motion privatisation and unbundling of Eskom, the state‑owned electricity utility that has long been a drain on public finances. Improved operational performance at Eskom was explicitly noted by S&P as a factor behind the rating upgrade. In parallel, South Africa successfully exited the Financial Action Task Force (FATF) greylist in October 2025, a move that reflects intensified efforts to combat money‑laundering and other illicit financial flows. Although the Madlanga Commission has exposed persistent gangsterism and corruption within state institutions, the FATF delisting demonstrates that credible progress is being made on the governance front, which in turn supports the government’s broader fiscal recovery narrative.
US Fiscal Decline Under Trump’s Second Term
While South Africa endeavours to rebuild fiscal credibility, the United States under President Donald Trump’s second term is moving in the opposite direction. Upon commencing his second term in January 2025, Trump inherited a national debt of $36.2 trillion; by August 2024 the figure had surged past $40 trillion—an increase of nearly $4 trillion in just nineteen months. The debt‑to‑GDP ratio is now approaching 125 %, roughly double the seventy‑five‑year average, and the economy’s modest growth rate of 2.3 % cannot keep pace with the accumulating obligations. As a result, the US is increasingly reliant on borrowing to finance its spending, a dynamic that raises alarms among investors and rating agencies alike.
Bond Yields and the Debt Spiral
The diverging fiscal paths are evident in sovereign bond markets. South Africa’s benchmark 10‑year government bond yield has eased to about 8.885 % as of mid‑October 2024, down roughly 20 basis points from a year earlier, reflecting improved investor confidence. By contrast, the US 10‑year Treasury note yield has climbed to 5.293 %, up approximately 120 basis points over the same period and nearing levels last seen in early 2002. Higher yields signal that lenders demand greater compensation for perceived risk, a direct consequence of the United States’ deteriorating fiscal outlook. Senior editor David Frum of The Atlantic observed that “trustworthy borrowers with solid finances and honest leadership pay less; distrusted borrowers with disordered finances and corrupt leaders pay more,” a characterization that now fits the US more aptly than South Africa.
Corruption, Enrichment Allegations and the Gangster State Narrative
The US fiscal deterioration is intertwined with allegations of self‑enrichment and corruption at the highest levels. Watchdog group American Oversight reports that during the first year of Trump’s second term he amassed more than $2 billion in new wealth through a combination of cryptocurrency ventures, suspiciously timed investments, high‑profile pardons, lawsuit settlements and real‑estate deals. Notably, Trump’s financial holdings remain outside a blind trust, and his public statements frequently move markets—illustrated by his purchase of Boeing stock shortly before announcing a Chinese order for 200 aircraft. Additional controversies include a purported $400 million “gift” of a Boeing aircraft from Qatar, linked to a luxury golf‑course deal, and the costly taxpayer‑funded security upgrades for that plane, which dwarf the infamous Nkandla security expenditures under Zuma. These actions feed a perception of the United States as a “gangster state,” where private profit and political power are increasingly indistinguishable.
Contrasting Trajectories and Outlook
South Africa’s fiscal story is one of cautious optimism: revenue gains from commodities, credible credit‑rating upgrades, modest structural reforms and an FATF delisting are creating a foundation for renewed investor trust, even as low growth and persistent corruption pose formidable headwinds. The United States, by contrast, illustrates how unchecked fiscal expansion, coupled with allegations of corruption and self‑dealing, can erode market confidence, push borrowing costs higher and accelerate a debt spiral that outpaces economic growth. The juxtaposition underscores a broader lesson: sustainable fiscal health depends not only on prudent budgeting and revenue mobilisation but also on transparent governance and institutional integrity. As Godongwana prepares his MTBPS, the South African case offers a template—imperfect but progressive—while the US experience serves as a stark warning of what can happen when fiscal discipline and accountability are abandoned.