South Africa’s Minister of Finance, Enoch Godongwana, has a rare opportunity when he presents the mini-budget roughly ten days from now - he can strongly and credibly argue on the facts of the case that the country’s fiscal position is much more robust than many analysts had predicted.

The two most important markers of South Africa’s fiscal health are the public debt ratio and the budget deficit – the latter especially in relation to the rate of economic growth. South Africa’s debt-to-GDP ratio may be in the high-70 percentiles, more than double that of 15 years ago, but even at that rate it is 10 to 20 percentage points lower than what some of the country’s harshest critics were projecting five years ago.

Likewise, the budget deficit may be a multiple of the rate of economic growth, but the Treasury has succeeded in maintaining a ceiling on that indicator despite political pressure to borrow aggressively. So successful has the Treasury been in maintaining that ceiling that South Africa now records a primary budget surplus – in other words, a surplus before interest payments. This has not been noticed to the extent that it perhaps should be.

Private research estimates that, through more effective customs and excise controls, sufficient revenue might be clawed back from South Africa’s illicit economy to shave a full percentage point off current deficit projections. The effect would be to vastly raise sentiment on South Africa’s finances bringing about downward pressure on borrowing rates.

Beyond customs enforcement, shutting down leakages in state procurement spending could free up a conservative R300 billion. That is enough, in and of itself, either to eliminate the bulk of the deficit or to cut a further percentage point off the deficit whilst doubling social-grant spend!

The minister has found himself in a bind in recent years as leftist critics accuse him of austerity whilst centrist commentators warn against increasing borrowing. The illicit-economy and procurement-leakage estimates above offer him the way out – as the Treasury could both rein in the deficit whilst increasing social protection spend.

To all the above can be added that the rand has appreciated over the past six months as the dollar retreated from the very high levels it held at the time of Trump’s election. This has eased inflationary risks. At this newspaper we speculate that the dollar may give up a further 10% over the next 18 months.

A curbing of domestic inflationary risks is occurring as global interest rates are coming off, creating room for South Africa’s central bank to bring some relief for consumers whilst, more consequentially, raising the prospect of cheaper sovereign borrowing, which will serve to rein in the debt ratio.

Then there is the further sentiment boost earned from South Africa’s exit from the Financial Action Task Force Grey List – a strong statement about South Africa’s ability to address concerns on internal financial regulation.

All that is missing from the equation is growth, but that is not the responsibility of the minister alone – rather of his broader Cabinet colleagues – although we are confident in saying that if the growth rate were to tick up to just 2% the effect would be to trigger a ratings-agency revision of South Africa’s credit risk.