{"id":794265,"date":"2024-10-08T18:00:00","date_gmt":"2024-10-08T16:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=794265"},"modified":"2024-10-08T15:15:50","modified_gmt":"2024-10-08T13:15:50","slug":"south-africas-money-is-finished","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/794265\/south-africas-money-is-finished\/","title":{"rendered":"South Africa’s money is finished"},"content":{"rendered":"\n

Economist Dawie Roodt warned that South Africa\u2019s significant debt burden and the fast rate at which it is increasing mean the country is heading for a financial crisis.<\/p>\n\n\n\n

Roodt told The Phumlani Majozi Show<\/a><\/strong> that public debt is around 75% of South Africa\u2019s gross domestic product (GDP).<\/p>\n\n\n\n

However, if the debt from the state-owned enterprises and local authorities is added to public debt, which it should be, the debt burden is closer to 90% of GDP.<\/p>\n\n\n\n

He explained that the finance minister would have to bail out many state-owned enterprises and municipalities that are in dire financial positions.<\/p>\n\n\n\n

\u201cEvery year, the debt increases by 2% to 3% relative to GDP. That debt needs to be funded. Somebody needs to lend money to the state,\u201d Roodt said.<\/p>\n\n\n\n

\u201cOne day, they will say, \u2018You owe too much money. You will not be able to repay me. I do not want to fund your deficits anymore\u2019.\u201d<\/p>\n\n\n\n

\u201cThis is the financial crisis I am talking about. That day will come if we continue on this trajectory.\u201d<\/p>\n\n\n\n

Roodt warned that South Africa was heading for a financial crisis as the state owed too much money.<\/p>\n\n\n\n

\u201cWe cannot afford to spend like we do. The money is \u2018finished and klaar\u2019. There is no money,\u201d he told Majozi.<\/p>\n\n\n\n

Currently, the government spends over R1 billion a day servicing its debt, as the interest on its R5.21 trillion debt pile has skyrocketed in the past decade.<\/p>\n\n\n\n

Roodt is not the only economist who is warning that the government should rein in spending and reduce debt.<\/p>\n\n\n\n

Sean Segar of Nedgroup Investments urged the government to view the debt burden over the long term and ensure it can be managed sustainably.<\/p>\n\n\n\n

He emphasised that the government \u201cneeds to kickstart growth\u201d as this is a sustainable way to reduce debt-to-GDP.<\/p>\n\n\n\n

Citadel\u2019s Chief Economist, Maarten Ackerman, agreed with Segar, saying the rising debt-servicing costs sound the alarm over a looming debt spiral.<\/p>\n\n\n\n

South Africa \u201cis in a tight corner, and if we don\u2019t stimulate growth, South Africa will come close to another debt spiral\u2026this time with higher interest rates\u201d.<\/p>\n\n\n\n

International factors increase risk in South Africa<\/strong><\/h2>\n\n\n\n
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Finance Minister Enoch Godongwana <\/figcaption><\/figure>\n\n\n\n

Finance Minister Enoch Godongwana revealed<\/a><\/strong> that an increase in inflation, interest rates, and the rand exchange rate significantly influences South Africa\u2019s debt.<\/p>\n\n\n\n

Godongwana told Parliament that the impact of rising interest rates in the United States on debt service costs is twofold.<\/p>\n\n\n\n