South Africa’s disastrous finances under Cyril Ramaphosa in one graph

The South African government’s financial situation has deteriorated over the past five years as it continues to run a budget deficit, forcing it to add to its already substantial debt burden. 

The South African Reserve Bank outlined this potentially severe decline in its first Quarterly Bulletin for 2024. 

The Reserve Bank noted that the government continues to spend more than it brings in through taxes, primarily due to subdued revenue collection and higher public wages. 

The main drivers behind reduced revenue collection were weak economic growth and lower global commodity prices. 

This led to the government borrowing R191 billion in the third quarter of 2023 to compensate for the shortfall. 

The shortfall was mainly financed in the domestic capital market through net issuance of Treasury Bills of R32.9  billion and government bonds of R69.5 billion. 

Concerns about the domestic fiscal position continued to weigh on non-residents’ demand for government bonds, while domestic banks reduced their net purchases from R25.7 billion in the second quarter of 2023 to R18.6 billion in the third quarter. 

Net purchases of government bonds by insurers and retirement funds amounted to R29.4 billion in the third quarter of 2023.

In addition, loan repayments amounted to R19.0 billion in the third quarter of 2023, together with cash and deposit withdrawals of R62.2 billion.

The third quarter of 2023 is emblematic of the government’s longer-term financial health, as it has run consistent deficits for the past 15 years.

However, this trend has accelerated in the past five years during President Ramaphosa’s administration. The effect of consistent deficits and the need to borrow increasing sums of money to finance government spending is shown in the graph below.

In his Budget Speech earlier this year, Finance Minister Enoch Godongwana outlined the declining health of South Africa’s public finances. 

He revealed that the government would run a R347 billion deficit for the current financial year, with further deficits to come in the future.

Running a budget deficit is not a bad thing in itself. However, if a government runs consistent deficits, then it may result in a debt spiral where new debt is issued to cover existing debt. 

That is exactly what the South African government has done since the 2007/08 financial year, when it last managed to balance the budget. 

Things changed quickly after Jacob Zuma dethroned Thabo Mbeki as ANC President. Pravin Gordhan took over from Trevor Manuel as Finance Minister, after which government spending spiked.

South Africa’s strong GDP growth during the Mbeki era stopped, and the country’s debt rapidly increased.

The trend accelerated under Cyril Ramaphosa’s presidency despite rhetoric from the president and finance minister pledging fiscal discipline. 

Since 2008, it has been 16 years of the government spending more than it collects, and the problem is only getting worse, with the deficit widening in recent years.

This has resulted in the government’s debt burden ballooning and its debt-servicing costs skyrocketing to one of the largest spending items in the country’s budget. 

Godongwana said that debt-service costs will absorb more than 20% of revenue, with the country paying over R1 billion a day in interest on its loans. 

The longer-term deterioration of South Africa’s public finances is shown in the graphs below.


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