{"id":797896,"date":"2024-10-30T15:07:41","date_gmt":"2024-10-30T13:07:41","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=797896"},"modified":"2024-10-30T15:08:22","modified_gmt":"2024-10-30T13:08:22","slug":"south-africas-massive-debt-headache","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/797896\/south-africas-massive-debt-headache\/","title":{"rendered":"South Africa’s massive debt headache"},"content":{"rendered":"\n

Finance minister Enoch Godongwana says that if South Africa wants to achieve the goals of its fiscal strategy\u2014which supports inclusive economic growth\u2014the country has to better manage its debt.<\/p>\n\n\n\n

Delivering the medium-term budget policy statement on 30 October 2024, the minister revealed that the country’s debt has risen too fast and is too high.<\/p>\n\n\n\n

“We are anticipating that government debt will reach more than R6.05 trillion, or 75.5% of GDP, in 2025\/26,” he said.<\/p>\n\n\n\n

This is a significant escalation from the R627 billion, or 23.6% of GDP, seen 15 years ago and higher than the 75.3% expected in February.\u00a0<\/p>\n\n\n\n

“This led to increasing debt-service costs consuming resources that could have been used for priorities such as education, healthcare and infrastructure,” said Treasury.<\/p>\n\n\n\n

The fiscal deficit is expected to widen to 5% of GDP, up from 4.5% projected in February, and higher than most economists predicted.<\/p>\n\n\n\n

The finance minister emphasised that the debt is unsustainable because debt-service costs have become the largest component of spending, rising faster than economic growth.<\/p>\n\n\n\n

Despite a stronger rand and cheaper bonds, debt-service costs will reach R388.9 billion in the current financial year \u2013 which means that for every R1 of revenue that government raises this year, 22 cents of this is paid in debt-service costs<\/strong>.<\/p>\n\n\n\n

Gross loan debt is expected to increase from R5.62-trillion in 2024\/25 to R6.82-trillion in 2027\/28. <\/p>\n\n\n

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To address this, Godongwana said that the government has implemented a fiscal strategy aimed at stabilising and ultimately reducing government debt. <\/p>\n\n\n\n

This strategy includes measures to reduce the budget deficit through spending restraint and stable tax collection to achieve a primary budget surplus.<\/p>\n\n\n\n

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As a result, the government achieved a primary budget surplus in 2023\/24 for the first time in 15 years.<\/p>\n\n\n\n

“The surplus is needed for us to stabilise debt,” said the finance minister, but emphasised that it is not a “pot of money” but rather the difference between what the government spends (excluding debt-service costs) and what the government collects in revenue.<\/p>\n\n\n\n

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