Policy think tank the Center for Development and Enterprise (CDE) on Thursday urged the Government of National Unity (GNU) to refrain from making any new unaffordable spending commitments, including unbudgeted increases to public sector remuneration.

CDE executive director Ann Bernstein said while the CDE acknowledged that there were no “magic bullets” for resolving the fiscal crisis, it believed the GNU must make meaningful progress to improve the quality of spending and to pursue faster economic growth.

The CDE released 'Action Three: Fix the fiscal crisis', the third report in its Agenda 2024 series which sets out a number of catalytic actions to reverse South Africa’s decline.

Bernstein said the current fiscal strategy can be strengthened by improving the quality and productivity of spending, by focusing on core business, eliminating low-impact and low-productivity activities, and by also enhancing accountability for service delivery.

Bernstein added that productivity commissions must be instituted and used to identify practical ways to increase service delivery within current budget limits, highlighting that these processes should be led by Operation Vulindlela – a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic recovery that is already active in the logistics space for instance.

She suggested that a high-level expert task team be appointed to relook at the structure and financing of local government, also emphasising the need for improvement in decision-making at the centre of government.

Bernstein said the GNU must identify and dismiss officials involved in theft and corruption, including the dismissal of officials credibly accused of wrongdoing.

The CDE noted that South Africa’s debt-to-gross domestic production ratio had declined from 50% in 1994 to 24% in 2008 but had now risen to 74%.

“Years of large structural gaps between government’s revenues and its spending have wiped out the fiscal progress achieved in the first 15 years of democracy, and the country is now in a much worse position than at the start of the democratic era,” said Bernstein.

She explained that South Africa’s position was much closer to that of a business that is insolvent than one that is merely experiencing cashflow problems and said the most desirable way to improve the sustainability of public finances was through economic growth.

“The effect of growth on fiscal sustainability is instantaneous because a growing economy can sustain existing levels of debt more comfortably. Achieving faster growth is not actually all that hard,” she added.

She highlighted that this required a government that wa committed to addressing the enormous governance deficiencies that exist – from cleaning up procurement, to sending corrupt officials to jail, to demanding higher standards from public servants.

“The confidence that would flow from actually doing this would electrify investment and growth,” she asserted.