Missed opportunities and mounting pressure: Kevin Lings on SA’s economic crossroads

In this incisive interview, Kevin Lings, Chief Economist at Stanlib, unpacks South Africa’s fiscal crossroads, political uncertainty, and the looming VAT hike. He critiques the Government of National Unity’s instability, the ANC’s policy missteps, and missed opportunities for economic reform. Lings calls for urgent, credible growth strategies to restore investor confidence and tackle unemployment and inequality. With sharp insights into fiscal discipline, cabinet inefficiencies, and foreign investor sentiment, he highlights the critical need for coherent policy action. A sobering yet constructive reflection on South Africa’s economic trajectory - and what it will take to turn it around..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here.Listen here.Edited transcript of the interview.Bronwyn Nielsen (00:00.984)Kevin Lings, the Chief Economist at STANLIB . There’s a movie unfolding in the South African economic and political landscape. Where do you stand right now in terms of the DA attempting to stop the VAT increase on the 1st of May? Will they succeed?Kevin Lings (00:13.160)I don’t think they’re going to succeed with that. I can understand their attempt and certainly the court case, but they’re probably not going to be successful. I think it will probably go ahead on the 1st of May. That doesn’t mean it persists on an ongoing basis.For me, it’s a suboptimal outcome. I think a far better outcome would be to avoid any VAT increase altogether and instead look to improve the efficiency of government spending. That seems like an obvious solution—especially since the half-a-percent VAT increase amounts to about 15 billion rand a year. I have to believe we can claw back 15 billion in inefficient spending and avoid all of this turmoil—this uncertainty that creates so much concern for investors.So yes, I think it’s unfortunate. I don’t think they’re going to be successful. What I hope happens, though, is a more thoughtful application of the government’s mind when it comes to revenue collection. Can we perhaps collect a bit more? SARS seems to believe it’s possible. Can we improve efficiency and, down the line, maybe even reverse the VAT hike?It’s not ideal, but you can do that, right? You could have the VAT increase for a while, and then at some point say, “We’ve been able to improve the situation—now we’re rolling it back.” The feedback we’re getting, and I think this is the more important point, is that the Government of National Unity (GNU) was a good outcome. But now we’re entering an extended phase of uncertainty.When you couple that with two other factors—one being the global problem with tariffs and the potential knock-on effects on global trade, which South Africa could easily get caught up in, and two, the negative attention from the Trump administration—those three factors together are clearly penalising us.Kevin Lings (02:33.220)You can see that in the currency. We’re underperforming other emerging market currencies significantly. Right now, we tend to blame the currency weakness on, “Oh, it’s the Trump thing.” But that’s not the full picture. The Trump factor is an element, yes—but it’s contributing to dollar weakness. If you look at the rand’s performance, especially against the trade-weighted basket, it’s very weak.That tells you there’s a South Africa-specific issue—and it goes beyond VAT. VAT doesn’t even come up when you talk to foreign investors. What comes up is the stability of the GNU and whether South Africa can handle the current global environment. There’s concern in both respects.Bronwyn Nielsen (03:22.412)What do you make of the stability of the GNU?Kevin Lings (03:27.565)I think the GNU is as stable as these things can be. Globally, coalitions tend to be intrinsically unstable. You go through many iterations. In countries that are used to coalition politics—like many in Europe—you get more used to it over time. But in South Africa, our political system lacks that maturity. So a stable outcome was always going to be difficult.This kind of conflict was inevitable. I just wish it had happened later—and over a more substantive issue. VAT, in my view, isn’t big enough to justify this level of disruption and uncertainty within the GNU. I’d have preferred it be a more meaningful policy debate. I think the GNU will hold together for now, but I’d bet that other issues will arise that could eventually cause a breakup.Bronwyn Nielsen (04:28.162)There’s consensus that this is an own goal by the ANC—forcing the VAT hike and continuing to lose power across the board. Do you agree?Kevin Lings (04:42.173)Yes, I don’t think anyone is excited about a VAT increase. I can’t imagine the business community or the average household saying, “Great, I love this VAT hike.” Most people are under financial pressure, and this adds to that. So no, I don’t think the ANC will gain any support through this move.More broadly, they’re not doing enough to lift the growth rate. And that’s the bigger issue—South Africa’s fiscal position needs more attention. If I can highlight this: in the budget, government projected GDP growth of 1.9%. Last year was 0.6%. So yes, 1.9% is an acceleration, but it’s still pathetic for what we need.Right now, we’re seeing significant downward revisions to GDP estimates, and private sector forecasts are moving closer to 1% growth. That creates a real risk. The budget’s revenue projections are built on 1.9% growth. Revenue is expected to grow by 9.2%—but last year it only grew by 4.2%.That’s a huge leap. If growth only hits 1%, we’ll miss the revenue target by far more than 15 billion. That VAT increase then becomes a drop in the bucket—and the missed revenue adds more pressure on economic performance. So we’re not doing enough to convince anyone we have a growth strategy.We keep putting forward these optimistic projections, then revising them down during the year, then promising a better outcome next year. It’s not convincing. What we need is a clear, compelling, implementable policy to lift growth. These VAT squabbles would then fade into the background. We just don’t have that growth agenda.Kevin Lings (06:59.613)Right now, we’re fighting over minor issues while ignoring the really big one: how do we grow South Africa faster?Bronwyn Nielsen (07:08.846)And on that note, is Enoch Godongwana, the South African Finance Minister, a safe pair of hands?Kevin Lings (07:16.638)I think he understands the role now. I would describe him as a reluctant finance minister at the outset. If you remember the circumstances under which he took over, there was a lot of encouragement for him to step in. He’s probably more comfortable in a policy advisory role—working in the background and shaping ideas that feed into ANC processes, which he’s done successfully for years.So I don’t think this was his first choice, but he’s grown into the role. What seems to be missing, though—and you could see it in the cabinet decision to hike VAT by 2% initially—is coordinated policy. There’s no sense of, “Let’s get together and define what we’re trying to achieve as a government.”Whether it’s trade, industry, labor, or finance—everyone’s operating in silos. Yes, he’s capable of doing the job, but the fact that the finance minister isn’t standing up and saying, “We can’t afford this spending, go back and rework your budgets,” tells me his political clout within Cabinet may be limited.He’s not a Trevor Manuel. And you can debate whether that’s good or bad. I think he understands the role, he’s capable—but we need a stronger economic voice in Cabinet to drive things forward. I’m not sure who that is right now.Bronwyn Nielsen (09:24.296)Should we bring back Trevor Manuel? Is there any hope?Kevin Lings (09:31.660)I doubt it. I think he’s more than happy with his current engagements. But if you think back to his time, there was a lot of pressure on him to spend—and he went in the opposite direction. He was heavily criticised for being too disciplined, too restrictive. But his policy framework was entirely appropriate at the time.South Africa didn’t struggle under his leadership. We got an A credit rating, managed debt effectively, grew over 4% for four years, and created hundreds of thousands of jobs. Fiscal discipline played a huge role in building business confidence.So yes, the pressure was there—he just resisted it, probably with strong backing from President Mbeki. That dynamic has changed. We don’t need to be draconian now, but we do need a clear, forceful growth strategy.Everyone—from the IMF to the World Bank—says the same thing: South Africa’s biggest issue is lack of growth. That should be our number one priority. Everything else is secondary.Bronwyn Nielsen (11:16.374)And Kevin, there’s also low-hanging fruit. Just sending a signal—like cutting the size of the Cabinet or reducing deputy ministers—could give the market real confidence. Investors are watching.Kevin Lings (11:42.347)Absolutely. Every government department could find efficiency gains without disrupting core programs. In fact, streamlining would likely strengthen those programs by focusing resources more effectively.The President even said at one point that he wanted to slim down the Cabinet. That wouldn’t solve the VAT issue alone, but it would send a positive signal. If followed by clear efficiency efforts, it could be really impactful. Business confidence would rise, and global sentiment would improve.The sad thing is—if South Africa showed real signs of unlocking growth, money would pour in. People recognise the potential here. The rand is undervalued. Bond yields are attractive. The stock market is cheap. There’s huge opportunity—but it won’t happen on its own. We need a real, credible growth strategy, with implementation—not just speeches.Bronwyn Nielsen (13:25.336)You’ve been through many economic cycles. How are you personally feeling right now, and how does this moment compare to previous ones?Kevin Lings (13:39.093)Honestly, it feels like another lost opportunity. The GNU initially offered hope, especially with its focus on public-private partnerships. That seemed like a step forward. And for a time, we were quite optimistic—especially from a medium-term perspective.But month after month, nothing happened. The momentum was lost. The goodwill around the GNU faded. The private-public initiatives have all languished or hit their own obstacles. We’re now entering a phase where it feels like the opportunity is slipping away.And with government debt at 76% of GDP, we don’t get many more opportunities. If our debt were 20 or 30%, we’d have more room. But in this global environment, opportunities are scarce—and competition is fierce. So we needed to act, and we didn’t. Now we face a much harder task.I worry people are starting to accept 2% growth as “good enough.” It’s not. It’s hopeless in the South African context. We’ve got to double that growth rate.Bronwyn Nielsen (15:31.134)It’s not even 2%. We’re already looking at closer to 1%. Anyone thinking 2% is living in La La Land.Kevin Lings (15:36.910)Exactly. But people still treat 2% as some sort of accomplishment. We were doing 3% not long ago, and even that wasn’t enough. Now we’re just accepting mediocrity. But it’s not solving anything—not unemployment, not poverty. A year from now, we’ll still be talking about revenue shortfalls, tax hikes, infrastructure delays. And time keeps slipping by.Bronwyn Nielsen (16:33.078)It’s about jobs. If we don’t grow, we can’t create employment. And without jobs, inequality worsens—bringing instability.Kevin Lings (16:48.177)Absolutely. Think about the young people leaving school or university, looking for opportunities. What do we tell them? How do they find work, build careers, develop skills? Year after year, we’re not dealing with that. We’ve lost a generation of opportunity.It just feels like we lack urgency—everything drags out. And we don’t have that luxury anymore. So yes, I’m a bit despondent. We know what needs to be done. Many experts agree. But there’s just no political will to act with urgency and resolve.Bronwyn Nielsen (18:08.226)You speak to many foreign investors. Are they giving up on us?Kevin Lings (18:14.031)Sentiment turned after the Trump administration vocalised its negative view on South Africa. Before that, optimism existed—especially around the GNU. I was on an investor call in Washington not long after Trump’s comments. South Africa came up directly, which rarely happens. The conclusion? “South Africa is uninvestable.”It wasn’t that they agreed with Trump—but they have options. South Africa is just one of many emerging markets. So why pick a country that the U.S. president is singling out negatively?That did a lot of damage. Add to that the fiscal uncertainty and unstable policy signals—foreigners don’t worry about half a percent VAT, they worry about whether the GNU holds, and whether growth will follow. If they don’t see that, they go elsewhere.I don’t think they’ve turned their backs forever. If we put forward something convincing, they’d come back. But we had the moment, and we missed it. That’s the real frustration.Bronwyn Nielsen (20:29.880)Kevin Lings, Chief Economist at STANLIB , thanks as always for joining us.

Missed opportunities and mounting pressure: Kevin Lings on SA’s economic crossroads

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