Treasury says coalition will not harm fiscal stance

The Treasury intends to stick to a balanced fiscal stance under a coalition government, director-general Duncan Pieterse said on Tuesday, after the ANC lost its majority in last week’s election.

“I think that our fiscal strategy is achievable, even in a coalition environment ... because it’s quite balanced,” Pieterse said in an interview.

The ANC has up to two weeks to agree on a coalition pact or another form of power-sharing arrangement with other political parties, after its share of the vote dropped below 50% for the first time in the post-apartheid era.

“A balanced macro-fiscal stance becomes more defensible in an uncertain political environment. And we intend to continue managing the fiscal stance along those lines,” Pieterse said.

The ANC’s potential partners diverge widely, from the free-marketeer DA to the more radical uMkhonto weSizwe party (MK) and the EFF, parties that advocate nationalising mines and banks and redistributing land.

Markets rallied on Monday as investors bet on the ANC opting for a coalition including the DA rather than one involving MK or the EFF. Though it may have to agree to some policy concessions or give away some cabinet posts as part of coalition negotiations, analysts do not expect the ANC to cede control of the finance ministry, which determines the country’s fiscal strategy working with the National Treasury.

“A balanced macro-fiscal stance becomes more defensible in an uncertain political environment. And we intend to continue managing the fiscal stance along those lines,” Pieterse, said.

“I think that our fiscal strategy is achievable, even in a coalition environment,” he said.

The business community has voiced concern over the prospect of the ANC entering a coalition with the EFF, which is calling for the seizure of white-owned farms and the nationalisation of mines and banks, or with former president Jacob Zuma’s uMkhonto weSizwe (MK) party, which also talks about land redistribution without compensation.

In the year to March, the Treasury managed to achieve a primary budget surplus — where revenue exceeded non-interest expenditure — for the first time in more than a decade.

That could help it arrest a rapid build-up in debt that has worried investors, though Pieterse said it did not give the government any room to deviate from its current fiscal path.

“If you achieve a primary fiscal surplus over a number of years and you start to see debt actually peak and come down, which is what we expect in 2025/26 ... then one can start having a conversation about fiscal space,” he said.

The Treasury said in this year’s budget presented in February that gross public debt as a percentage of GDP was at its highest since 1947. Gross debt-to-GDP was seen hitting 73.9% in March, rising to 75.3% in March 2026.

Update: June 4 2024
This story has been updated with new comment.

Reuters