ESSAY REQUIREMENTS

Submission is online.
Date: 22 April 2024 [To be confirmed]
The essay length must not exceed 1 500 words and all the necessary requirements of
referencing, a title page, abstract and a statement that the essay is your own work must be
met. These requirements and rules regarding plagiarism can be found in pages 17-24 of the
Course Outline as well as online.
The essay must be submitted on time, must be typed and will automatically be submitted to
Turnitin. Plagiarism or attempts to disguise plagiarism by using synonyms will not be
tolerated.
Unlike in first year, there is no provision for resubmitting essays that have received poor
marks.

ESSAY TOPIC: South Africa’s Fiscal Constraint: Prospects for Consolidation

In the recent Oxford Handbook of the South African Economy, Ajam (2021) in analysing
public finance and fiscal policy in 21st century South Africa concludes that “ The coronavirus
pandemic mere amplified the trends towards [fiscal] unsustainability arising from a decade
of the country’s failure to cut its fiscal coat according to its cloth-increasing expenditures
despite a structural drop in economic growth potential after the [2000s] commodity boom, as
interest rates far exceeded economic growth rates and debt service costs rose markedly as a
proportion of taxes collected. This was compounded by a decade of corruption, state capture,
loadshedding, policy uncertainty, and a host of domestic policy implementation failures. The
precarious fiscal policy outcomes are but a manifestation of deeper political economy and
structural challenges that stymie growth, not their root cause (Oqubay et al., 2021: 952)

Discuss this claim in terms of the following.

Section A:
 What has been the trend of public debt to GDP in South Africa since dawn of the new
millennium? How does it compare today vs the early 2000s?
 What were the key drivers of this trend politically and socioeconomically?
 In comparison to three or four emerging market economies how has South Africa fared
in terms of prudence and efficiency of debt-based public expenditures? Is this something
South Africans should worry about?

Section B:
 Given the rigidity of corruption and inefficiencies associated with government spending
in South Africa, what are the prospects that the government will consolidate debt and
stabilize the debt to GDP in the face of domestic pressures such as persistent
unemployment, policy uncertainty, and patronage?
 Given your analysis of the South African debt problem, what do you think will be the
most effective way of reducing government indebtedness, ensure fiscal sustainability and
credibility in the country?
 If the above (sustainability and credibility) cannot be achieved, what are the prospects for
a fiscal crisis in South Africa, and what would be the political and economic
consequences of such a crisis?
There are a huge number of possible references in the popular media as well as in Google
scholar. You will need your textbook for the theory. Some useful references are:

BURDA,M.,and WYPLOSZ,C., 2022. Macroeconomics: A European Text. Oxford

University Press.

OQUBAY, A., TREGENNA, F., and VALODIA, I., (EDS.). 2021. The Oxford Handbook of
the South African Economy. Oxford University Press (soft copy available on request at the
library

BLANCHARD, O., and JOHNSON R.D., 2019. MACROECONOMICS. PERSON

In addition to these, you are expected to review fiscal data and the accounts of the South
African government. These are published regularly by the International Monetary Fund, the
World Bank, the National Treasury, and the South African Reserve Bank to varying degrees
of frequency. Please note that even though this exercise requires an interpretation from your
part as a student, your scholarly argument needs to be presented with facts (DATA!) and
findings from reputable sources (peer revied academic papers) and texts that enjoy the same
degree of scholarship as your own prescribed textbook.