South Africa running out of time


South Africa must repay R90 billion in foreign debt within the next three years as the country faces a significant fiscal deficit and mounting debt servicing costs.

This is according to the South African Reserve Bank’s (SARB) September 2023 Quarterly Bulletin.

The government owes a total of R427 billion in marketable debt to foreign creditors as of 30 June 2023.

Of this total, R28.4 billion will be due for repayment within one year, R61.6 billion will be due for repayment within one to three years, and R337 billion will be due for repayment in more than three years.

Therefore, South Africa will need to repay R90 billion to foreign creditors within the next three years.

According to the SARB, on average, the government will take 156 months – 13 years – to repay its foreign debt.

Unexpired maturity composition of South Africa’s national government’s marketable foreign debt at face value. Source: National Treasury and the SARB.

Budget deficit

This comes as the Finance Minister recently announced that South Africa could be facing a severe fiscal deficit as tax revenue came in lower than expected.

Economists at the Bureau for Economic Research (BER) said South Africa’s fiscal situation is increasingly concerning “as tax revenue undershoots and government spending exceeds earlier expectations”. 

According to the National Treasury, South Africa’s monthly budget balance fell back into a larger-than-expected and record monthly deficit of R143.8 billion in July, following a R36.6 billion surplus in June.

“The fiscal balance is being squeezed from both the revenue and the expenditure side,” the BER said. 

In the first four months of the current fiscal year – April to July – gross government tax revenue increased by only 0.8% year-on-year. 

This compares with the February budget expectation for an increase in the entire fiscal year of 5.6%. 

“If the current pace of underperformance in tax collections is sustained through the entire fiscal year, gross tax revenue will be R82 billion – 1.2% of GDP – lower than the February projection.”

At the same time, government expenditure is outpacing budget expectations, increasing by 9% year-on-year from April to July.

This is significantly higher than the February budget forecast of a 1.5% increase for the entire fiscal year. 

“These trends support the view that the 2023/24 main budget shortfall will vastly outpace the 3.9% of GDP forecast in the February budget,” the BER said.

Finance Minister Enoch Godongwana

Rising debt and costs

The fiscal deficit is only set to worsen as South Africa’s debt servicing costs keep mounting. 

Efficient Group chief economist Dawie Roodt recently warned that South Africa’s deficit and debt levels are approaching dangerous territory.

South Africa’s current debt-to-gross domestic product (GDP) ratio is 73%. In nominal terms, the country owes around R5 trillion.

At the current trajectory, Roodt expects the debt-to-GDP ratio to reach 76% in the current financial year and increase to 80% the year after that.

“A debt-to-GDP ratio of 80% for South Africa is getting into dangerous territory,” Roodt warned.

Earlier this year, economists started sounding the alarm over South Africa’s increasing debt burden and particularly its debt-servicing costs, which threaten to drag the country into a debt spiral.

Debt servicing costs are the payments that a government makes to its creditors, including interest payments and repayments of principal.

South Africa’s debt servicing costs have increased to roughly R1 billion a day, which Sean Segar of Nedgroup Investments calculates at $1 per day per South African citizen.

This line of expenditure has increased disproportionately to other expenditures, and the addition of R254 billion of Eskom’s debt will amount to 19.8% of total government spending in the next three years.

According to the SARB’s bulletin, the debt-service cost schedule of the national government’s foreign debt reflects the interest payments by currency of debt denomination due in the next 12 months, as from 30 June 2023.

Interest payments in US dollars dominate the schedule, as expected from the currency of denomination analysis, followed by interest payments in rand on the Covid-19-related debt denominated in rand.

Interest payment schedule of national government’s total foreign debt.


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