South Africa’s Risk and Opportunity Options Following Budget Delay

The abrupt postponement of South Africa’s national budget should be assessed from its immediate consequences as well as the medium term strategic risks and opportunities.

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While the delay in the presentation of the national budget is a shock and undermines confidence in the GNU, it also signals the potential for new strategic choices in the financial strategy for South Africa.

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According to Volker Von Widdern, Strategic Risk Principal at Riskonet Africa, this delay is a clear indication of deeper political fractures within the Government of National Unity (GNU) and poses a threat to business confidence if there is an ongoing stalemate and a lack of policy direction that will substantially increase South Africa's growth rate, from the GNU.

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Expectations from the budget have been signaled from various quarters. The IMF has indicated that South Africa should not increase its debt to GDP ratio and this should rather be reduced to 60% from the current target of 75, 5%, which is in any event likely to be exceeded. Various parties have called for more decisive policy and action to support growth. The limits on the fiscus are already being felt by the cuts in teacher numbers, for example. In this context, tax increases were expected to fund both rising expenditure and to arrest the growing levels of debt. The DA amongst other parties signaled their resistance to these plans prior to the budget and the Cabinet debate on 19 February could not resolve the matter.

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These divergent views are important from a strategic risk analysis perspective. If debt levels in South Africa Increase above levels that are appropriate for emerging economies, the cost of debt will increase as new bond issues Both replace retiring bonds and finance new expenditure. This accelerates the increase in interest costs further reducing capacity for growth in the budget.

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Von Widdern says the postponement is not merely a fiscal scheduling issue but a governance failure with far-reaching consequences. “This is more than just a delay—it is a fundamental crisis in economic policy direction. The inability to present a unified budget highlights? the wide range of economic policies being advocated within the governing coalition and raises concerns over prolonged decision-making paralysis.”

Beyond market reaction, Von Widdern stresses the potential long-term economic repercussions. “The absence of a clear economic policy framework hampers long-term planning for businesses and investors. Critical funding for infrastructure, essential services, and social relief programs is at risk, which in turn heightens the possibility of public unrest.”

We are all familiar with the sayings “necessity is the mother of invention” or “don’t waste a crisis”. While the risks are serious, there is an opportunity to accelerate economic development options that do not add stress to the fiscus. Instead of endlessly debating the possible Public Private Partnerships (PPP), South Africa can create its own “Marshall Plan”.

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Sale and leaseback models that include capacity enhancement commitments can generate immediate funds on sections of SOE asset portfolios, with the leases transferring ownership back to the State at the end of the periods.

Targeted areas of infrastructure development can be allocated to private sector or industry groups using well known Build/Operate/Transfer models. Local and international investors have appetite for both of these models at significant scale, thus creating a sustained pipeline of growth opportunities.

The critical issues are minimising contract and regulatory delays, and reliable execution of these projects, which require control by the private sector, in order to protect their capital commitments.

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With South Africa’s risk profile deteriorating, Von Widdern is calling on the risk management community to take proactive steps toinclude the opportunities for collaboration at industry level that will address bottlenecks in their sectors.. Risk professionals need to engage with government and industry bodies to push for greater transparency, accountability, and fiscal discipline, particularly to ensure that expenditure is producing the value for which it is intended. Instead of increasing taxes to meet fiscal pressures, elimination of waste and investments in improved tax collection will create a stronger governance and ethics environment for the country.”

He also urged businesses to reassess their financial operational resilience. “Now is the time for organisations to ensure agility in responding to potential financial and regulatory shifts. Close tracking of political developments and economic indicators will be critical in anticipating further disruptions, such as significant shifts in the rate of exchange and to interest rates.”

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Von Widdern concludes with a stark warning. “The budget delay is not just a political setback—it indicates an inflection point that could shape South Africa’s economic trajectory for years to come. How the government navigates the coming weeks will determine whether the country can regain confidence or slip further into uncertainty.”

He's called for urgent collaboration between risk professionals, industry leaders, and policymakers. “The risk management community cannot afford to be passive observers. We must drive discussions on governance, economic stability, and resilience to ensure businesses and investors are prepared for the road ahead.”

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