{"id":92732,"date":"2025-11-10T17:50:20","date_gmt":"2025-11-10T17:50:20","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble"},"modified":"2025-11-10T18:00:01","modified_gmt":"2025-11-10T18:00:01","slug":"south-africa-heading-for-serious-financial-trouble","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble","title":{"rendered":"South Africa heading for serious financial trouble"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>South Africa\u2019s economy is not growing fast enough to stabilise the government\u2019s debt burden as a share of GDP, with it set to continue to grow despite National Treasury projections showing otherwise.<\/p>\n

The National Treasury has consistently forecasted a peak in the debt-to-GDP ratio in every budget since 2009, which is still yet to materialise.<\/p>\n

Finance Minister Enoch Godongwana said earlier this year that the 2025\/26 financial year will see the debt burden peak as a share of GDP before beginning to decline.<\/p>\n

This is due to the National Treasury\u2019s policy of fiscal consolidation, which has resulted in successive primary budget surpluses.<\/p>\n

With the government on track for a wider surplus than initially expected, this could be the year that the state\u2019s debt burden finally peaks.<\/p>\n

Coronation\u2019s economics unit, however, urged caution, saying that South Africa\u2019s economic growth is not sufficient at current rates.<\/p>\n

In an analysis of South Africa\u2019s long-standing economic challenges, Coronation explained that its baseline shows the country\u2019s debt-to-GDP ratio will continue growing into the 2030s at current economic growth rates.<\/p>\n

This would be catastrophic for the country, with the Reserve Bank warning that even at current levels, South Africa is at risk of entering a debt trap.<\/p>\n

South Africa is already in an unsustainable financial situation, as the interest rates owed on government debt are higher than the country\u2019s nominal economic growth.<\/p>\n

This means that South Africa\u2019s debt-servicing costs are compounding at a faster rate than the country\u2019s economy, making it unsustainable over the long run.<\/p>\n

Debt-servicing costs already amount to over R1.2 billion a day for the government, crowding out spending in other areas of the economy, including education and healthcare.<\/p>\n

These costs are on track to take over social grant payments in the coming three years, according to the National Treasury.<\/p>\n

While others are positive regarding the potential to stabilise South Africa\u2019s debt burden, Coronation is more cautious in its analysis.<\/p>\n

\u201cIf growth remains in the painfully weak 0.5% to 1% range, current fiscal allocations, even with tough consolidation and a rising primary surplus, will not be sufficient to stabilise the debt trajectory,\u201d it said.<\/p>\n

\u201cDebt continues to rise relative to GDP, crowding out investment, raising borrowing costs, and diverting resources away from social and capital spending.\u201d<\/p>\n


\nA decade of promises<\/b><\/p>\n

The National Treasury has projected a stabilisation in the country\u2019s debt burden for over a decade. In practice, this has proven far more difficult to achieve.<\/p>\n

While it has been projected with hard data, the stabilisation date has consistently been postponed, resulting in South Africa\u2019s debt-to-GDP ratio rising from 24% of GDP in 2010 to over 75% in 2025.<\/p>\n

Each postponement, while often seeming legitimate at the time, has had a cumulative effect and now puts the country on the edge of a financial crisis.<\/p>\n

Following the Finance Minister\u2019s several budget speeches earlier this year, Coronation\u2019s head of fixed interest, Nishan Maharaj, explained why this is the case.<\/p>\n

While the National Treasury remains committed to its policy of fiscal consolidation by financing new expenditure through revenue increases, there is often a crucial mismatch.<\/p>\n

The increased expenditure tends to be recurring and fixed, implying any fall-off in growth and thus tax revenue will create a large funding shortfall.<\/p>\n

This increases the risks of a higher debt load and results in the government taking on new expenditure projects that it cannot finance in the long run.<\/p>\n

Furthermore, the National Treasury accounts for its debt-servicing costs on a cash basis rather than traditional accrual accounting methods.<\/p>\n

Maharaj explained that this results in it setting up its debt accumulation forecasts for disappointment. In other words, it accumulates more debt than its forecasts.<\/p>\n

Therefore, the risks are heavily skewed towards a worse budget outcome going forward if economic growth does not recover significantly.<\/p>\n

Maharaj argued that economic growth of 3% per annum is needed to stabilise the government\u2019s debt load and begin to improve its financial health.<\/p>\n

Even this faster economic growth will amount to South Africa\u2019s debt-to-GDP ratio peaking at 80% of GDP, rather than the 76% forecasted by the National Treasury.<\/p>\n

This growth rate is also much higher than anything South Africa has achieved over the past decade, with growth averaging 0.8% per annum. It is also forecasted to only grow at 1.5% per annum for the next three years.<\/p>\n

<\/p>\n

Source: dailyinvestor<\/b><\/p>\n

For More News And Analysis About South-Africa<\/span> Follow Africa-Press<\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. South Africa\u2019s economy is not growing fast enough to stabilise the government\u2019s debt burden as a share of GDP, with it set to continue to grow despite National Treasury projections showing otherwise. The National Treasury has consistently forecasted a peak in the debt-to-GDP ratio in every budget since 2009, which is still […]<\/p>\n","protected":false},"author":84,"featured_media":92731,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6],"tags":[275],"class_list":["post-92732","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","tag-south-africa-2"],"yoast_head":"\nSouth Africa heading for serious financial trouble - South Africa<\/title>\n<meta name=\"description\" content=\"South Africa\u2019s economy is not growing fast enough to stabilise the government\u2019s debt burden as a share of GDP, with it s ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Africa heading for serious financial trouble\" \/>\n<meta property=\"og:description\" content=\"South Africa\u2019s economy is not growing fast enough to stabilise the government\u2019s debt burden as a share of GDP, with it s ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2025-11-10T17:50:20+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-11-10T18:00:01+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/11\/sm_1762784961.354787.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"675\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"South Africa heading for serious financial trouble\",\"datePublished\":\"2025-11-10T17:50:20+00:00\",\"dateModified\":\"2025-11-10T18:00:01+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble\"},\"wordCount\":740,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/11\/sm_1762784961.354787.jpg\",\"keywords\":[\"South-Africa\"],\"articleSection\":[\"all news\",\"files\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-heading-for-serious-financial-trouble\",\"name\":\"South Africa heading for serious financial trouble - 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