Finmin Godongwana faces policy tightrope

South Africa's Finance Minister Enoch Godongwana is facing a delicate balancing act as he prepares to table the country's medium-term budget policy framework amidst a backdrop of global economic challenges. The country is grappling with slowing global growth, rising interest rates, high inflation, and sub-par public and private sector investments. To shed light on the current state of South Africa's financial fiscal framework, Andrew Matheny, the South Africa economist at Goldman Sachs, joined CNBC Africa for a discussion. Matheny highlighted the significant fiscal deterioration South Africa has experienced over the past 15 years, with debt levels soaring from 24% to nearly 70% of GDP. However, there has been a recent shift in the landscape, with revenues surpassing expectations due to high commodity prices supporting mining profitability. This surplus in revenue has led to a better-than-forecast deficit, putting the budget on track for a balanced primary position this year. The strong revenue performance is expected to continue, providing a positive outlook for the country's public debt stabilization. Looking ahead, Matheny projected high single-digit nominal GDP growth for South Africa in the medium term, driven by global inflation and commodity prices. Despite concerns of a potential global recession and inflationary pressures, Matheny believes that the Federal Reserve's approach to tightening financial conditions aims to achieve a soft landing, although risks remain. He noted that South Africa, in a different cyclical position from the rest of the world, has seen weaker economic performance and relatively stable inflation. However, the South African Reserve Bank has responded to inflationary pressures by raising interest rates, potentially impacting growth projections. Goldman Sachs' outlook for South Africa's growth remains conservative, with flat to slightly above 1% growth expected for the near future. As Finance Minister Godongwana navigates these challenging economic dynamics, balancing fiscal responsibility with growth stimulation will be key to ensuring South Africa's financial stability and recovery.