Fiscal Imbalance and the Case for Economic Self-Determination

Foreword

The purpose of this piece is not to divide, inflame, or revisit old grievances. It is to start a practical and honest conversation about how the Western Cape can build a stronger and more stable future. We cannot ignore the reality that our province contributes far more to the national fiscus than it receives in return, while facing some of the fastest-growing demands on infrastructure, education, safety, and social support. This imbalance is not sustainable, and it holds back the very progress South Africa desperately needs.

Economic self-determination is not about separation. It is about responsibility, accountability, and the freedom to invest in our own communities in ways that are transparent, effective, and measurable. If we want growth, opportunity, and dignity for every resident of the Western Cape, we must be willing to rethink how public resources are collected and used. This article sets out why that conversation matters, and why the time to have it is now.

Introduction

South Africa is a nation in need of growth, stability, and leadership driven by results rather than slogans. The Western Cape, with its track record of better governance and economic performance, has already shown what is possible when public money is handled responsibly and accountability is taken seriously. Yet the province is consistently placed at a structural disadvantage due to the way national revenue is collected and redistributed.

The Western Cape contributes far more than it receives.

For any region, this would be unsustainable. For a province experiencing rapid population growth and increasing pressure on infrastructure and services, the imbalance demands urgent and honest attention.

This is not a partisan issue. It is not a matter of ideology or party identity. It is a question of fairness, practicality, and the basic economic principle that growth should be nurtured, not suppressed. If South Africa wants to expand opportunity instead of watching it shrink, it must allow well-performing regions to reinvest more of what they produce. The Western Cape has proven that it can do more with less. The question is what it could achieve if allowed to keep enough of its own resources to plan sustainably, modernize effectively, and build for the future.

The Numbers Tell a Clear Story

The Western Cape is home to roughly 14 percent of the national population. Yet it contributes approximately 16.4 percent of the country’s GDP according to Statistics South Africa’s 2023 provincial accounts.[1] It also hosts one of the highest concentrations of registered taxpayers in higher income brackets. SARS tax data consistently shows that the Western Cape produces a disproportionately large share of national personal and corporate tax revenue relative to population size.[2]

Despite this, the Western Cape receives only 10 to 11 percent of national funding allocations through the Division of Revenue Act.[3] The gap between contribution and allocation is not small. It amounts to tens of billions of rand every year flowing out of the province before provincial needs are met.

This plays out in highly visible ways:

1. Housing demand in fast-growing towns and cities overwhelms municipal capacity.
2. Public transport networks remain strained due to national-level failures at PRASA.
3. Provincial healthcare systems are pressured by migration from weaker provinces.
4. Local policing priorities are constrained because the police remain centrally controlled.

“No economy grows by draining its strongest regions. Growth comes from strengthening what already works and then replicating it where it is needed.”

This is not merely a budgeting discussion. It is a development question. It is a question of whether South Africa continues to hold back the regions that are showing signs of success or whether it empowers them to drive national recovery.

A Model That Punishes Efficiency

The Western Cape has consistently ranked among the most financially responsible provinces. According to the Auditor-General’s 2021 and 2022 municipal audit reports, the Western Cape has the highest proportion of clean audits in the country.[4] This means public funds are traceable, accounted for, and used within legal and ethical boundaries. The province has shown that when funds are managed locally and transparently, they are spent more effectively.

Yet the current system does not reward efficiency. Instead, it equalizes outcomes by redistributing revenue away from high-performing regions and into systems where waste, patronage, and mismanagement are entrenched. Redistribution is not the problem.

Redistribution without accountability is. If money continues to be poured into failing systems without correcting why they fail, then inequality grows deeper, not smaller.

“When taxpayers see their contributions improving their own communities, trust in public institutions grows and accountability strengthens.”

A nation that discourages good governance ends up encouraging poor governance. That is the path South Africa must avoid.

What Economic Self-Determination Offers

Economic self-determination means giving regions the right to retain more revenue and direct its use according to local priorities. It does not mean separation. It does not mean closing borders. It means aligning funding with real needs and real performance.

Examples of this approach exist across stable, successful democracies:

1. Germany’s Länder share tax authority and co-decide national budget structures.
2. Canadian provinces control their resource revenues and provincial tax systems.
3. Swiss cantons design their own tax and economic policies while cooperating nationally.

None of these structures weaken the state. They strengthen it by ensuring regions have the responsibility and incentive to perform well.

What the Western Cape Could Do With More Control

If allowed to retain and allocate a larger portion of its revenue, the Western Cape could:

1. Modernise Cape Town Harbour and Saldanha port for export competitiveness.
2. Expand renewable energy capacity to end dependence on Eskom.
3. Strengthen anti-gang policing with regionally aligned crime strategies.
4. Build more schools and raise teacher pay in under-resourced communities.
5. Establish large-scale technical training pipelines matched to industry demand.
6. Develop infrastructure faster in growing towns such as Paarl, George, Worcester, and Stellenbosch.

This is not simply about autonomy. It is about unlocking the ability to plan long term instead of waiting for insufficient national allocations.

“The future will not be built by equalising failure. It will be built by expanding success and allowing it to lift others with it.”

Conclusion

The Western Cape is already contributing more than its fair share to the country. It is not asking to contribute less. It is asking to be allowed to convert its contributions into growth, stability, and opportunity within its own borders. A stronger Western Cape does not weaken South Africa. It strengthens it.

South Africa needs all of its engines of productivity running. Smothering one of the strongest is not fairness. It is self-sabotage.

Fair fiscal reform is not only possible. It is necessary.

Sources

• Statistics South Africa. Provincial Gross Domestic Product by Region, 2023.
• South African Revenue Service (SARS). Tax Statistics Annual Report, 2022.
• National Treasury. Division of Revenue Act, Budget Review 2022 and 2023.
• Auditor-General of South Africa. Municipal Audit Outcomes Report 2021-2022.

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