{"id":822832,"date":"2025-05-01T15:17:04","date_gmt":"2025-05-01T13:17:04","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=822832"},"modified":"2025-05-01T15:17:36","modified_gmt":"2025-05-01T13:17:36","slug":"south-africa-rushing-towards-a-serious-disaster","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/trending\/822832\/south-africa-rushing-towards-a-serious-disaster\/","title":{"rendered":"South Africa rushing towards a serious disaster"},"content":{"rendered":"\n

South Africa is heading towards a serious financial disaster with mounting debt and excessive state spending. An urgent intervention is needed to prevent a crisis.<\/p>\n\n\n\n

This is the warning from Efficient Group chief economist Dawie Roodt, who said that South Africa is headed for a recession, and all the bad things that come with it.<\/p>\n\n\n\n

South Africa\u2019s state finances have deteriorated significantly over the last sixteen years due to overspending and poor economic growth.<\/p>\n\n\n\n

The state has run consistent deficits, funded through debt. The debt-to-GDP ratio increased from 26% in 2009 to around 76% in 2025.<\/p>\n\n\n\n

However, this only tells part of the story. Roodt said South Africa\u2019s real debt-to-GDP ratio is closer to 95% when factoring in state-owned enterprises and local authorities.<\/p>\n\n\n\n

Due to the rising debt burden, South Africa will spend R424.9 billion on debt-service costs this financial year.<\/p>\n\n\n\n

Over the medium-term budget framework, debt servicing costs will consume 22 cents of every rand of tax collected.<\/p>\n\n\n\n

To address this problem, Finance Minister Enoch Godongwana said they are taking steps to ensure a sustainable public finance position for South Africa.<\/p>\n\n\n\n

He said it includes protection against unforeseen shocks while fostering an environment conducive to increased investment and accelerated economic growth.<\/p>\n\n\n\n

Their plan includes investing in growth, anchoring fiscal policy, increasing revenue, and long-term budget planning.<\/p>\n\n\n\n

He said the government\u2019s latest fiscal strategy calls for achieving milestones in rebuilding the public finances over the next year.<\/p>\n\n\n\n

\u201cIn 2025\/26, public debt will reach its peak, stabilising at 76.2% of GDP. This achievement is attributed to a growing primary budget surplus,\u201d he said.<\/p>\n\n\n\n

\u201cConsequently, debt-service costs will peak in the current year, stabilising at 21.7% of revenue, and subsequently decline.\u201d<\/p>\n\n\n\n

He added that the consolidated budget deficit is projected to narrow from 5% of GDP this year to 3.5% of GDP in 2027\/28.<\/p>\n\n\n\n

South Africa has an economic growth problem<\/h2>\n\n\n\n
\"\"<\/a>
Efficient Group chief economist Dawie Roodt<\/figcaption><\/figure>\n\n\n\n

There is a problem with the state\u2019s plans. Godongwana\u2019s forecast that South Africa\u2019s real economic growth will increase to 1.9% in 2025 is too optimistic and well above other estimates.<\/p>\n\n\n\n

The International Monetary Fund (IMF) cut its economic growth forecast for South Africa to just 1%, as US President Donald Trump\u2019s tariffs wreak havoc on financial markets.<\/p>\n\n\n\n

Roodt also said South Africa\u2019s economic growth this year will be lower than initially anticipated and expects GDP growth of 1%. 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

Without the National Treasury\u2019s expected 1.9% economic growth, the country will not meet its planned revenue collection.<\/p>\n\n\n\n

If the South African economy grows only by 1%, as the IMF and Roodt expect, the 2025 Budget will have a big hole.<\/p>\n\n\n\n

The government\u2019s deficit will be higher than anticipated, forcing the state to borrow more money and further increase the already-high debt-to-GDP ratio.<\/p>\n\n\n\n

Roodt warned that the country will face a financial disaster unless the government addresses this unsustainable debt burden.<\/p>\n\n\n\n

\u201cOne day, we will see the South African bond market collapse. The bond market keeps everybody on the straight and narrow,\u201d he said.<\/p>\n\n\n\n

He warned that when the bond market experiences turmoil, yields will rise to between 15% and 25%, sending shockwaves through the local financial market.<\/p>\n\n\n\n

The rand will significantly weaken, negatively affecting the financial market. South African banks will be the hardest hit.<\/p>\n\n\n\n

\u201cInsurance prices will fall. Equity prices will fall. All South Africans will suddenly become much poorer,\u201d Roodt explained.<\/p>\n\n\n\n

The South African Reserve Bank (SARB) will be forced to increase interest rates as inflation will increase due to higher petrol prices.<\/p>\n\n\n\n

\u201cThe economy will go into a tailspin. There will be much weaker economic growth, a deep recession, and all the negative effects that go with it,\u201d he said.<\/p>\n\n\n\n

\u201cThat is what we are heading towards if we do not turn South Africa\u2019s dismal fiscal situation around.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa is heading towards a serious financial disaster with mounting debt and excessive state spending. An urgent intervention is needed to prevent a crisis.<\/p>\n","protected":false},"author":10,"featured_media":812963,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23,1],"tags":[1459,17448,21799,3796,20457],"class_list":["post-822832","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","category-trending","tag-dawie-roodt","tag-enoch-godongwana","tag-finance-minister-enoch-godongwana","tag-national-treasury","tag-south-african-reserve-bank-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/822832","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=822832"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/822832\/revisions"}],"predecessor-version":[{"id":822833,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/822832\/revisions\/822833"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/812963"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=822832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=822832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=822832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}