Government’s R347 billion headache

Enoch Godongwana

South Africa’s government is facing a deficit of around R347 billion for the 2023/24 financial year – over 40% more than the previous year.

This is according to Investec chief economist Annabel Bishop, who said the deficit to date for 2023/24 is already over R300 billion.

It currently stands at R312 billion, while the revised deficit for the full fiscal year is projected at R347 billion – a substantial increase from the R247 billion deficit in 2022/23.

Bishop added that gross loan debt is projected at 74.7% of GDP for 2023/24, significantly up from 70.9% in 2022/23.

It is also far higher than the 72.2% of GDP initially projected for 2023/24. 

Bishop said this lift in projected borrowings has caused market concern and weakened yields.

In addition, she said South Africa has not benefited substantially from the prospect of US interest rate cuts compared to other emerging market economies.

The rand is the fourth worst-performing EM currency year on year after Russia, Argentina and Turkey’s currencies.

She said the deterioration of South Africa’s fiscal health provided some disincentive to foreign investment into the country’s government debt, which usually strengthens markedly on expectations of US rate cuts. 

South Africa faced a capital exodus in 2023, as foreigners sold off billions in South African assets, according to the South African Reserve Bank (SARB) in its Quarterly Bulletin in December 2023.

The second quarter of 2023 saw non-South African residents make net purchases of JSE-listed bonds amounting to R22.1 billion.

However, this trend reversed in the third quarter, with net sales totalling R4.9 billion. October and November then witnessed a turnaround as net purchases surged to R23.8 billion. 

Therefore, cumulative net bond purchases for the first 11 months of 2023 stood at only R14.9 billion, compared to net sales of R4.6 billion in 2022.

The SARB said several factors contributed to these fluctuations, with concerns about persistent inflation and the potential for central banks to maintain higher interest rates for longer playing a pivotal role. 

Consequently, the share of non-resident holdings in domestic government bonds dropped from an all-time high of 42.8% in March 2018 to 25.4% in October 2023.


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