South Africa pays R13,473 every second in debt interest

Award-winning economist Dawie Roodt said South Africa’s debt is unsustainable and should be considered a ticking time bomb.

Roodt made these comments during a presentation where he discussed the 2025 Budget delivered by Finance Minister Enoch Godongwana on Wednesday, 12 March.

Godongwana said government debt will stabilise at 76.2% of gross domestic product (GDP) in the 2026 financial year.

“As debt stabilises, a growing primary surplus will enable the government to reduce debt-service costs as a proportion of revenue,” he said.

He said some of those savings would be used to build up fiscal buffers, which South Africa needs to protect against future economic shocks.

Over the last financial year, debt-service costs amounted to R389.6 billion. This translates to 22 cents of every rand the country raises in revenue.

“It is more than what we spend on health, the police and basic education,” Godongwana told parliament.

“We must reverse this trend and prevent the cost of debt from draining resources that could otherwise be spent on our pressing social needs or on investing in growth,” he said.

However, South Africa is not off to a good start. Debt-servicing costs will increase to R424.9 billion in the next financial year.

This 9% increase in South Africa’s interest payments is one of the fastest-growing items in the 2025 Budget.

Godongwana’s statement that government debt will stabilise at 76.2% of GDP only tells a part of the story.

Roodt highlighted that the government also has implicit and explicit debt obligations linked to state-owned enterprises.

“There are implicit and explicit that finance minister Enoch Godongwana must include in his outstanding debt estimates. He does not do that,” Roodt said.

South Africa has R770 billion in guarantees to state-owned enterprises, which are not included in the debt levels Godongwana shared.

South Africa’s rising debt burden

Godongwana admitted that taking on additional debt to meet the spending pressures was also not feasible.

“The amount is simply too large. The cost of borrowing would be unaffordable,” the minister said in his budget speech.

“Our sub-investment credit rating would also make this level of borrowing costlier and put us at risk of even further downgrades.”

Despite the dismal financial situation, Godongwana expected South Africa’s debt-to-GDP outlook to improve over the next seven years.

He said South Africa’s gross debt-to-GDP would stabilise at 76.2% in this financial year and then decline to 67% in the 2033 financial year.

Roodt said the Finance Minister’s gross debt-to-GDP outlook is optimistic as he always kicks the can down the road instead of reducing the ratio.

He said South Africa remains on an increasing debt-to-GDP trajectory, which means the ratio will likely increase in the coming years.

He highlighted that South Africa’s debt and R424.9 annual interest payment could be displayed in ways that better illustrate the problem’s magnitude.

• Every South African owes R96,709 more than they think due to state debt.

• South Africa pays R13,473 every second in interest on its debt.

Roodt said that South Africa’s rising debt burden is a ticking time bomb that should be addressed to avoid serious problems.