A very common scenario: One sibling supports the other, covering rent, essentials, daily costs. Necessary, and done with care. But the support is funded through borrowing, interest compounds, and extra hours go to servicing that debt. A child arrives. The obligation deepens. Neither party moves forward.
Now consider a different path. The same sibling sets aside part of that commitment — connects the other to an opportunity, funds a practical skill, backs a venture. The supported sibling earns, the recurring obligation falls, the debt becomes manageable. The net household income increases. Same spend. Same care. Structurally different outcomes.
South Africa’s fiscal position sits inside a version of that story. The familiar debates — capital versus current, austerity versus stimulus, tax hikes versus cuts — crowd out quieter questions about the structure of what is already being spent. Embedded within the current fiscal architecture are three measurable levers, versions of which exist in policy and practice. What is largely missing is their deliberate application as a discipline.
Lever 1: The liability reduction ratio
The government’s largest recurring obligations are not its bonds, they are its transfers. About R284.7bn this year in child support grants, R560/child, social relief of distress (SRD) grant of R370, disability and unemployment support. Essential. But there is a real difference between spending that sustains an obligation and spending that actively reduces it.
For every rand spent, how many rand does it reduce in recurring transfer obligations? (Tracked by comparing changes in transfer expenditure against the spend that triggered them.) A payment with no pathway attached has a liability reduction ratio (LRR) of zero — met today, owed again tomorrow. Spending structured to move someone towards productive participation generates a positive LRR. Every government aspires to this. What is different is the measurable commitment: an explicit target before any line is approved — 80c less in transfer obligations per R1 spent on activation — with spending designed to reach it.
Consider what that looks like in practice. As a participant’s expanded public works programme income grows above R625/month, reliance on the SRD grant naturally reduces — a saving of R4,440/year. As earnings rise further, dependence on the child support grant (R560/child, means-tested at R4,800/month) progressively gives way to the household’s own capacity. As combined income approaches R350,000/year, children increasingly self-fund tertiary education, reducing reliance on National Student Financial Aid Scheme bursaries — worth R150,000 or more per student.
Lever 2: The tax effect multiplier
South Africa’s tax base is narrow. Each new revenue proposal presses the same small group harder. A different question: can government spending expand who contributes — not by raising rates, but by pulling more activity into the formal system?
For every rand spent, how many rand does it generate in new tax revenue across pay as you earn (PAYE), VAT and corporate tax? (Tracked against the expenditure that preceded them, using national budget and South African Revenue Service data.)
When procurement goes to a supplier in the tax net, the return is thin. When the same spend draws informal activity into the formal economy, workers enter PAYE, enterprises pay tax, and VAT cascades through spending that previously generated nothing. Every budget speech calls for a broader tax base. The difference is intentionality: an explicit tax effect multiplier (TEM) target before any line is approved — how much new revenue is this designed to generate? — and held to account.
Rwanda’s trajectory makes the point precisely. Its tax-to-GDP ratio rose from 8.5% in 2000 to 17.3% by 2019 — a TEM consistently above 1 as formalisation investment returned more than a rand in new revenue per rand spent. The International Monetary Fund documented that 2010–2015 alone added nearly four percentage points of GDP through base-broadening. Intent, designed in and tracked. Which raises a harder question.
Lever 3: The debt reduction ratio
Debt is not only a function of how much you borrow — it is a function of borrowing, growth, revenue and the obligations you carry. Shift any of those, and you shift the trajectory.
For every rand spent, by how many rand does it reduce the net debt position — directly or through growth and revenue effects? (Tracked against changes in debt-to-GDP and the deficit, factoring in downstream growth effects.)
Spending that lifts growth reduces debt-to-GDP without touching the stock. Spending that widens the tax base narrows the deficit. Spending as a first-loss guarantee attracts private capital — debt incurred that is smaller than the asset created.
Singapore has institutionalised this: it borrows to invest through sovereign funds, which returned S$21.6bn — about 3.3% of GDP — to the budget in the 2023 financial year, producing a debt reduction ratio (DRR) well above 1. Its gross debt-to-GDP exceeds 170%, yet it holds a triple-A rating because agencies assess net worth, not gross debt.
South Africa’s primary surplus in 2025 and the streamlined public-private partnership framework are early DRR-positive signals. The question is whether spending decisions actively serve that trajectory or simply sit alongside it.
Where the numbers lead
If current trends hold — 22c per revenue rand on debt service, 5.4% of GDP in interest through 2027/28, growth below 1.5% — the maths needs new inputs. More revenue and less spend are necessary. But neither addresses the composition question: within what is already committed, how much fiscal work is each rand doing?
LRR, TEM and DRR are not a formula. They are a framework — three lenses asking a sharper question of each budget line: not only what does this cost, but what does it return? The data exists. The programmes exist. The architecture is taking shape. What has been harder to assemble is the intentionality to apply all three simultaneously, and make that the standard.
• Mafinyani is risk advisory & financial modelling partner at DiSeFu, a specialised financial technology and risk advisory firm operating in the Sub-Saharan region.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.