{"id":838431,"date":"2025-09-28T19:49:43","date_gmt":"2025-09-28T17:49:43","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=838431"},"modified":"2025-09-28T19:49:43","modified_gmt":"2025-09-28T17:49:43","slug":"south-africa-heading-towards-a-serious-disaster","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/838431\/south-africa-heading-towards-a-serious-disaster\/","title":{"rendered":"South Africa heading towards a serious disaster"},"content":{"rendered":"\n

Renowned economist Dawie Roodt said South Africa is heading for a serious financial crisis due to the country\u2019s unsustainable debt levels.<\/p>\n\n\n\n

Roodt shared his views on the South African economy and the country\u2019s trajectory at the recent Biznews Conference in Hermanus.<\/p>\n\n\n\n

He told delegates that South Africa\u2019s national government debt-to-GDP (gross domestic product) ratio is around 77%.<\/p>\n\n\n\n

However, this only tells part of the story. The state is also responsible for a significant portion of the debt of state-owned enterprises and local authorities.<\/p>\n\n\n\n

Fifteen years ago, most state-owned enterprises and local authorities were able to cover their expenses without incurring debt.<\/p>\n\n\n\n

However, they have been run into the ground in recent years, accumulating high debt levels due to mismanagement and overspending.<\/p>\n\n\n\n

When their debts are combined with those of the national government, the country\u2019s debt-to-GDP ratio is approximately 85%.<\/p>\n\n\n\n

Even more concerning is that the country\u2019s debt is rising at an annual rate of around 2% to 3% of GDP, which should raise alarm bells.<\/p>\n\n\n\n

\u201cWe are heading for a serious financial crisis because South Africa\u2019s debt levels are around R6.5 trillion. That means every South African owes R100,000 more than they think,\u201d he said.<\/p>\n\n\n\n

Roodt explained that South Africa is spending money on things that will not result in economic growth, and it does so by incurring debt.<\/p>\n\n\n\n

\u201cSouth Africa is borrowing long-term money, and the Minister of Finance is spending it on short-term current expenditure, essentially destroying capital,\u201d he said.<\/p>\n\n\n\n

He stated that capital formation in South Africa is approximately 15% of the country’s GDP. This needs to be increased to 25%.<\/p>\n\n\n\n

Capital formation is the increase in a country’s stock of capital goods, which are long-term physical assets.<\/p>\n\n\n\n

These long-term assets include items such as machinery, buildings, and infrastructure used to produce other goods and services, rather than being consumed immediately.<\/p>\n\n\n\n

\u201cThe Minister of Finance is reducing South Africa\u2019s capital formation by destroying capital. The state is the biggest destroyer of capital in the country,\u201d he said.<\/p>\n\n\n\n

\u201cWe have low levels of savings, and a large part of these savings are destroyed by the government.\u201d<\/p>\n\n\n\n

7.9 million personal income taxpayers fund 28 million grant recipients<\/h2>\n\n\n\n
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Efficient Group chief economist Dawie Roodt<\/figcaption><\/figure>\n\n\n\n

Roodt explained that South Africa is in an unsustainable financial situation due to the structure of the economy and tax base.<\/p>\n\n\n\n

The 2025 Budget revealed that South Africa\u2019s 7.9 million personal income taxpayers fund 28 million grant recipients.<\/p>\n\n\n\n

However, these taxpayers also include many government employees. This means that approximately 30 million South Africans rely on a state income.<\/p>\n\n\n\n

The biggest revenue stream for the state is personal income tax. Here, 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

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

In other words, 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

South Africa is already over the Laffer curve with these two sets of taxes, which means that further tax increases will not produce additional tax revenue.<\/p>\n\n\n\n

\u201cThe state\u2019s finances are in very deep trouble and we are heading for a financial crisis in South Africa,\u201d Roodt said.<\/p>\n\n\n\n

He said the only way South Africa can fix its disastrous financial situation is through economic growth. \u201cThere is nothing else we can do,\u201d he said.<\/p>\n\n\n\n

The way to achieve this is by protecting private property rights, encouraging free trade, and having sound money.<\/p>\n\n\n\n

\u201cWhen you do these three things, I can guarantee you that the South African economy will grow,\u201d Roodt said.<\/p>\n\n\n\n

South Africa’s core economic indicators<\/h2>\n\n\n\n
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\"\"<\/a><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n","protected":false},"excerpt":{"rendered":"

Renowned economist Dawie Roodt said South Africa is heading for a serious financial crisis due to the country\u2019s unsustainable debt levels.<\/p>\n","protected":false},"author":10,"featured_media":812401,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[1459,2562,20767,853],"class_list":["post-838431","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-dawie-roodt","tag-efficient-group","tag-gdp-per-capita","tag-south-africa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/838431","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=838431"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/838431\/revisions"}],"predecessor-version":[{"id":838463,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/838431\/revisions\/838463"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/812401"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=838431"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=838431"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=838431"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}