Every South African owes R80,000 more than they think

Renowned economist Dawie Roodt explained that because of government debt, every South African owed R80,000 more than they thought.

Roodt shared this insight during Efficient Group’s presentation following Finance Minister Enoch Godongwana’s 2024 Budget Speech.

He said state debt got out of hand during the Zuma years. Government debt to gross domestic product (GDP) increased from 27.8% in 2008 to 72.2% in 2023.

Significant deficits mean state debt continues to increase while the economy is showing nearly no growth.

Servicing this debt comes at a big cost. Within two years, South Africa will spend more on debt‐service costs than on social development or healthcare.

Debt service costs are set to rise from R356.1 billion over the last year to R440.2 billion in the 2026/2027 financial year.

It equates to an average annual growth of 7.3% – the highest of any government expenditure item. It is also much higher than 3.9% growth of other items like education and security.

“Debt‐service costs consume more of the budget than social development, health, community development, economic development or peace and security,” the Treasury said.

“In 2023/24, for the first time since 2000/01, debt‐service costs absorb more than 20 cents of every rand collected in revenue.”

National Treasy explained that in 2023/24, debt‐service costs were revised upwards by R15.7 billion compared with the 2023 Budget estimate, mainly due to the higher budget deficit.

“As a share of GDP, debt‐service costs are projected to average 5.2% over the medium term,” the Treasury said.

“As a share of revenue, they are expected to increase from 20.8 per cent in 2023/24 to 21.1 per cent in 2026/27.”

A 1 percentage point increase in inflation and interest rates, together with a R1 depreciation of the rand against the dollar, results in a R50.7 billion increase in gross loan debt.

These increases, in turn, result in a R7.9 billion increase in debt service costs to the country.

The chart below shows South Africa’s debt‐service costs as a share of the country’s main budget revenue.