{"id":821820,"date":"2025-04-23T13:04:45","date_gmt":"2025-04-23T11:04:45","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=821820"},"modified":"2025-04-23T13:04:49","modified_gmt":"2025-04-23T11:04:49","slug":"south-africa-heading-for-a-financial-disaster","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/821820\/south-africa-heading-for-a-financial-disaster\/","title":{"rendered":"South Africa heading for a financial disaster"},"content":{"rendered":"\n

Award-winning economist Dawie Roodt warns that South Africa\u2019s current trajectory is unsustainable and that the country needs to make big changes to jumpstart economic growth.<\/p>\n\n\n\n

South Africa’s real gross domestic product (GDP) per capita declined from R78,437 in 2008 to R74,411 in 2023, which means citizens became poorer over the last fifteen years.<\/p>\n\n\n\n

Even more concerning is that the country ran budget deficits over the last 15 years, which significantly increased debt.<\/p>\n\n\n\n

In 2008\/09, South Africa\u2019s gross loan debt amounted to R627 billion, or 26% of gross domestic product (GDP). It has ballooned to R5.21 trillion, or 73.9% of GDP.<\/p>\n\n\n\n

It gets worse. Roodt explained that the government guarantees a large amount of debt from state-owned entities (SOEs), and local authorities also owe large sums.<\/p>\n\n\n\n

Ultimately, the Minister of Finance may need to bail these entities out, but this debt isn\u2019t included in the official debt-to-GDP calculation.<\/p>\n\n\n\n

\u201cIf you include that debt, then we\u2019re probably talking about a debt-to-GDP ratio in the region of about 90%,\u201d Roodt said.<\/p>\n\n\n\n

The government relies on increasing tax revenue to repay this growing debt burden and fund the state machinery.<\/p>\n\n\n\n

However, South Africa has a very narrow tax base and an economy which hardly grows, placing enormous pressure on tax revenue.<\/p>\n\n\n\n

South Africa\u2019s 2024 tax statistics revealed that only 1,051 companies pay 72.3% of all company income tax in the country.<\/p>\n\n\n\n

Companies with taxable income greater than R100 million constituted 0.1% of the total number but contributed 72.2% of taxable income and 72.3% of assessed tax.<\/p>\n\n\n\n

The same goes for personal income tax. 978,140 South Africans, or 1.5% of the population, pay 60.9% of all personal income tax.<\/p>\n\n\n\n

Even more concerning is that only 235,542 South Africans, or 0.4% of the population, pay 33% of all personal income tax.<\/p>\n\n\n\n

This base is already overtaxed, and trying to increase taxes further will result in lower tax revenue rather than more.<\/p>\n\n\n\n

Old Mutual Wealth investment strategist Izak Odendaal said the South African government’s interest rate on its debt is higher than the country\u2019s economic growth.<\/p>\n\n\n\n

Odendaal warned that this situation is unsustainable and means the country will eventually hit a fiscal cliff.<\/p>\n\n\n\n

This means South Africa needs to change course to avoid a debt spiral and subsequent financial disaster.<\/p>\n\n\n\n

Poor economic growth outlook<\/h2>\n\n\n\n
\"\"<\/a>
Economist Dawie Roodt<\/figcaption><\/figure>\n\n\n\n

Speaking to Biznews<\/a>, Roodt said South Africa\u2019s economic growth this year is set to be lower than initially anticipated.<\/p>\n\n\n\n

This week, the International Monetary Fund slashed South Africa\u2019s 2025 growth expectations by 0.5 percentage points to 1.0%.<\/p>\n\n\n\n

The IMF said the impact of the United States’ tariffs will be far-reaching, and no economy will escape the shockwaves set to follow.<\/p>\n\n\n\n

This is much lower than Finance Minister Enoch Godongwana\u2019s forecast of 1.9% economic growth for 2025.<\/p>\n\n\n\n

Roodt has much lower growth expectations for South Africa, especially considering the local and global headwinds.<\/p>\n\n\n\n

He started the year expecting GDP growth of 1.5%, which aligns with population growth in South Africa. \u201cHowever, a few new headwinds appeared,\u201d he said.<\/p>\n\n\n\n

These headwinds include United States tariffs, South Africa losing its AGOA benefits, and the instability of the government of national unity (GNU).<\/p>\n\n\n\n

These factors and a potential global recession will negatively impact South Africa\u2019s economic growth in the medium term.<\/p>\n\n\n\n

Roodt said that, in the best-case scenario, South Africa should expect around 1% economic growth. However, with further headwinds, it can be much lower.<\/p>\n\n\n\n

\u201cThis growth is very bad, as the finance minister depends on economic growth to fund South Africa\u2019s large state machinery,\u201d he said.<\/p>\n\n\n\n

To resolve this downward spiral, South Africa needs to improve state efficiency and implement policies to encourage economic growth.<\/p>\n\n\n\n

\u201cUnless this is done, South Africans will continue getting poorer and rich people will continue to leave due to a lack of opportunities,\u201d he said.<\/p>\n\n\n\n

\n\n\n\n

South Africa’s budget deficit<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n
\n\n\n\n

South Africa’s real GDP per capita<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n
\n\n\n\n

South Africa\u2019s Debt-to-GDP Ratio<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n
\n","protected":false},"excerpt":{"rendered":"

Award-winning economist Dawie Roodt warns that South Africa\u2019s current trajectory is unsustainable and that the country needs to make big changes to jumpstart economic growth.<\/p>\n","protected":false},"author":10,"featured_media":713112,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[1459,17448,20167],"class_list":["post-821820","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-dawie-roodt","tag-enoch-godongwana","tag-government-of-national-unity-gnu"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/821820","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=821820"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/821820\/revisions"}],"predecessor-version":[{"id":821908,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/821820\/revisions\/821908"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/713112"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=821820"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=821820"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=821820"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}