Government’s plan to stop spending R1.2 billion a day on ‘nothing’

The government’s immense debt burden requires it to spend around R1.2 billion per day on interest, a problem it plans to address by achieving sustained primary budget surpluses.

This will require the government to not only collect more revenue but also spend more efficiently and reduce wasteful expenditure.

Finance Minister Enoch Godongwana recently outlined the government’s strategy to stabilise its debt and reduce spending on servicing this debt.

This was said in response to a Parliamentary question from IFP MP Nhlanhla Hadebe, who asked the minister for a detailed breakdown of the National Treasury’s debt-stabilisation strategy.

In the 2025 Budget, Godongwana projected that South Africa’s debt will stabilise at 77.4% of GDP in 2025/26.

South Africa’s debt-to-GDP ratio has consistently increased over the past few decades, resulting in a significant rise in the government’s debt-service costs.

These costs are set to absorb 22% of the government’s revenue in 2025/26, making it one of the state’s largest expenditure items, surpassing health, the police, and basic education.

In his 2025 Budget Speech, presented in May, the minister stated that debt-service costs will amount to more than R1.3 trillion over the next three years.

This means that, in 2025/26 alone, the government will spend around R1.2 billion a day to service its debt.

To address this problem, Godongwana stated that the National Treasury has a multifaceted strategy, which includes achieving sustained primary surpluses.

The 2024/25 financial year marked the government’s first primary budget surplus in 15 years.

Simply put, a primary budget surplus means the government’s revenue exceeds its spending, excluding interest expenditure.

Therefore, running a surplus requires the government to either spend less or collect more revenue, or, ideally, a combination of both.

Godongwana said the government is attempting to achieve both in the 2025/26 financial year.

To enhance its collection efforts and increase revenue, the South African Revenue Service (SARS) has received a R4 billion boost in additional funding over the medium term.

The Treasury also introduced various measures in the 2025 Budget to grow revenue further, including an increased fuel levy and no adjustments to personal income tax brackets.

While its initial plan for a VAT hike was struck down, the Treasury plans to raise an additional R16.7 billion through these other measures.

While this is set to boost government revenue, aiding the Treasury’s mission to achieve a primary budget surplus, Godongwana’s plans for spending adjustments are far more complicated.

The graphs below show where the National Treasury expects South Africa’s debt to stabilise and its plans to achieve primary budget surpluses over the next three years.

Spending better, not less

The Treasury’s plan to achieve a primary budget surplus hinges on spending more efficiently, and not necessarily less.

Godongwana explained that the government plans to curb wasteful expenditure through closing underperforming programmes and improving procurement, infrastructure delivery, and ICT.

Additional reforms include enhanced payroll oversight and measures to eliminate ghost workers, utilising data-driven systems.

The minister stated that, since 2013, reviews of over R312 billion in spending have identified potential savings of R37.5 billion. 

This is more than the estimated R20 billion in additional revenue that the Treasury’s proposed VAT hike would have raised.

However, Godongwana explained that many of the “low-hanging fruits” identified through previous spending reviews have already been implemented. 

Now, implementing the remaining recommendations will require institutional and legislative reforms that fall outside the National Treasury’s direct control. 

“These reforms will take time to materialise and are unlikely to provide immediate fiscal relief. Achieving meaningful savings will therefore demand strong political will and difficult policy trade-offs,” he said.

As seen in the controversy surrounding the 2025 Budget, which had three iterations as GNU members could not agree on a common approach, budget trade-offs are highly politicised in South Africa.

Therefore, any austerity measures will be extremely difficult to enforce.

However, Godongwana said the Treasury will continue to build on the work already undertaken by identifying additional underperforming programmes for closure, thereby reducing duplication, wastage, and inefficiencies.

Another aspect of the Treasury’s plan to achieve a primary budget surplus through more efficient spending relies on additional expenditure on infrastructure.

Godongwana stated that, as part of the Treasury’s plans to reduce debt, over R1 trillion is proposed for medium-term infrastructure investment, with a focus on the energy, water, transport, and digital sectors. 

While additional spending may seem counterproductive to a government looking to achieve a budget surplus, Godongwana explained that this increased funding will support South Africa’s growth and reduce fiscal risk.

This is why the government is also facilitating greater private sector participation in infrastructure through new regulations for public-private partnerships.

Additionally, the government is accelerating structural reforms through Operation Vulindlela Phase 2 to alleviate economic bottlenecks.

“These measures aim to raise growth potential and support fiscal consolidation, helping to avoid further credit rating downgrades,” the minister explained.

Economic bottlenecks, particularly in the energy and logistics sectors, have been some of the biggest drains on South Africa’s fiscus in recent years.

This is because bailouts for state-owned enterprises like Eskom and Transnet directly impact government coffers, and the lost economic output is estimated to cost South Africa billions yearly.