Africa-Press – South-Africa. The government’s massive R5.3 trillion debt burden has made debt service costs one of the state’s biggest spending items.
This crowds out spending on more productive sectors of the economy, such as health, education and the police.
Luckily, the National Treasury plans to stabilise the state’s debt burden over the next year, although some risks to this plan remain.
Statistics South Africa (Stats SA) recently performed an analysis of the audited financial statements for 705 government institutions, which revealed what the state’s spending priorities are.
Stats SA found that the general government spent R2.4 trillion in 2023/24, with the general public services category being the largest spending item, taking up 25% of total expenditure.
This was followed by education (20%), social protection (15%) and health (12%).
The agency explained that a closer inspection of the general public services category reveals public debt transactions as the significant cost driver.
According to the National Treasury, South Africa’s government held R5.3 trillion in gross loan debt as of 2023/24.
The costs related to servicing debt, which mainly include interest payments on borrowings, amounted to R356 billion, or just under 15% of total spending.
“Compared with other government priorities, the category of public debt transactions exceeded the amount allocated to health (R276 billion) and was almost on par with social protection (R365 billion),” Stats SA said.
The agency further pointed out that the state’s debt-servicing bill was the most significant contributor to the rise in expenditure in 2023/24.
Overall, government spending grew by a net R139.3 billion compared with the previous year. Specifically, spending in the general public services category expanded by R48.0 billion, driven mainly by a R47.7 billion rise in public debt transactions.
Debt service costs have grown from constituting 9.9% of total government spending in 2017/18 to 14.9% in 2023/24. This can be seen in the first graph below, courtesy of Stats SA.
The second graph shows Stats SA’s breaksdown of South Africa’s general government expenditure in 2023/24.
The Treasury’s plan
The National Treasury has recognised how unsustainable the state’s debt burden and growing debt service costs are, with plans to stabilise the debt burden in the 2025/26 fiscal year.
Mismanagement of state-owned enterprises, exorbitant government spending and a stagnant economy resulted in the state’s debt burden surging from 26% of GDP in 2008 to over 77% in 2025.
To stabilise this debt burden, it is crucial for the government to achieve a primary budget surplus, which will allow the state to chip away at its debt burden and free up spending for more productive line items.
Positively, South Africa is on track to do exactly this in the 2025/26 fiscal year, which will allow the Treasury to stabilise and, over the coming years, continue paying off the government’s debt.
However, to keep this momentum going, the state will need to ensure its spending and revenue are better aligned than in the past decade.
The South African Revenue Service (SARS) is also set to play an even more important role in the coming years, as a more efficient taxman is instrumental to ensuring increased and consistent state revenue.
This is particularly crucial considering the Treasury has limited options for raising taxes in South Africa, with the country’s small tax base already under immense pressure.
In addition, the Treasury will need to ensure that it keeps a handle on government spending, particularly when it comes to guarantees for state-owned enterprises.
The government currently has R707.8 billion in contingent liabilities, which include guarantees given to state-owned enterprises like Transnet and Eskom.
This is one of the major contributing factors to the significant rise in the South African government’s debt over the past decade.
Since being appointed as Finance Minister in 2021, Enoch Godongwana has taken a “tough love” stance towards supporting SOEs, which has seen the state’s contingent liabilities decline from 19% of GDP in 2020/21 to 15.7% in 2025/26.
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