South Africa has no more money

Ann Bernstein, the executive director of the Centre for Development and Enterprise (CDE), warned that South Africa has run out of money.

The CDE is an independent policy research and advocacy organisation and South Africa’s leading development think tank.

Bernstein is a highly regarded commentator who worked with the Development Bank of Southern Africa, the World Economic Forum, and the Brenthurst Foundation.

She told delegates at the 2025 Biznews Conference that the 2025 Budget abandoned last year’s promise to cut spending to address the deficit.

Instead, Finance Minister Enoch Godongwana increased taxes through a value-added tax (VAT) increase and personal income tax bracket creep.

She said the government offered civil servants, who are already overpaid, a higher-than-inflation increase, which put tremendous pressure on the country’s finances.

Another thing that drains South Africa’s budget is the localisation and black economic empowerment (BEE) laws.

Hundreds of billions are lost due to the costs related to BEE, which compels the government to pay more than market value for goods and services.

“We estimate that the country can save over R50 billion in three years by doing away with these requirements,” Bernstein said.

Another area where the government could save money is by eliminating sector education and training authorities (SETAs).

“Nobody likes the SETAs. They are not performing. They are corrupt, and they are useless. You can save R80 billion by stopping their funding,” she said.

She said the government needs to take spending cuts seriously and set clear targets for where spending will be cut.

She warned that if South Africa continues with its current policies, it will drive the country into a bigger crisis.

“We are living beyond our means. We need to be like the Argentinian President Javier Milei who campaigned under the slogan, ‘We have no more money’,” she said.

South Africa is out of money

Bernstein is not the only economic expert who warned that South Africa is out of money and is heading towards a financial disaster.

Last year, Efficient Group chief economist Dawie Roodt said South Africa has run out of money as the state’s fiscal debt rapidly rises while the economy stagnates.

“There’s no doubt that the money is finished, and it is certainly worse today than it was a year ago,” he said in June 2024.

Roodt explained that this can be seen by looking at South Africa’s fiscal debt, which keeps increasing from one year to the next.

Godongwana said in his 2025 budget speech that government debt is expected to reach 76.2% of South Africa’s gross domestic product (GDP) in this financial year.

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.

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.

However, it gets worse. 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.

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.”