How South Africa stumbled into a fiscal trap

Loading player...
GUEST – Roy Havemann is Principal: Financial Sector Policy and Public Economics at Krutham (previously Intellidex).


Over the past decade, the interest rate that South Africa pays on its debt has consistently been above the economic growth rate. Mathematically, this means that debt grows as a percentage
of GDP. It becomes a “vicious circle”. Higher debt makes investors and ratings agencies nervous, meaning the interest rate they are prepared to pay for our debt rises. This increases borrowing costs and hurts investment spending, making fiscal consolidation
(and counter-cyclical fiscal policy) more and more difficult, making the fiscal position worse and raising the sovereign risk premium.

The interest rate rises again and the cycle continues. The National Treasury is keenly aware of this — and of the trade-off between services and fiscal consolidation. The Budget Review
put it plainly: “The 2024 Budget balances development and sustainable public finances. In the context of persistently low economic growth, the government will protect critical services, support economic growth through reforms and public investment, and stabilise
public debt… Rapid growth in debt-service costs chokes the economy and the public finances. The government is staying the course to narrow the budget deficit and stabilise debt. This year, for the first time since 2008/09, the government will achieve a primary
budget surplus. Debt will stabilise in 2025/26.”
6 Mar 2024 12PM English South Africa Business News · Investing

Other recent episodes

Pivot Point: Shaping Africa’s Energy Future

Ndapwilapo Selma Shimutwikeni, Founder and CEO of RichAfrica Consulting, shares insights on transforming Africa’s natural resource potential into sustainable economic growth. We explore investment opportunities in oil and gas, the Orange Basin, Namibia’s energy policy, ESG strategies, and how African countries can better leverage natural resources for long-term development.
12 Mar 1PM 38 min

Standard Bank Group Posts Strong 2025 Results

Standard Bank Group has closed 2025 on a strong note, reporting headline earnings of R49.2 billion and a return on equity of 19.3%, hitting the top end of its ROE target range. CEO Simpiwe “Sim” Tshabalala joins us to unpack the drivers behind the bank’s performance, including growth in digital…
12 Mar 1PM 11 min

South Africa’s Mining Sector Off to a Strong Start

Stats SA reports a 4.6% rise in mining output and a 31.7% jump in mineral sales year-on-year for January. Mining analyst Peter Major breaks down which minerals are driving growth, whether gains are linked to prices or volumes, and what these trends mean for investors and the South African economy.
12 Mar 1PM 11 min

INSIDE YOUR POCKET: Retirement Under Pressure: Rising Debt Among Older South Africans

As South Africa’s population ages, more seniors are turning to credit to cover everyday expenses. Andrew Fulton, Director at Eighty20, explores the financial realities for “Humble Elders” and “Comfortable Retirees,” why defaults among seniors are rising, and what this means for families, policymakers, and the broader economy.
12 Mar 1PM 13 min

Sanlam Delivers Strong 2025 Results and Pan-African Expansion

South Africa’s leading financial services group, Sanlam, achieved record new business of R496 billion, with net client cash flows more than doubling. CFO Abigail Mukhuba discusses the group’s operational performance, Pan-African growth strategy, strategic acquisitions like Assupol and Shriram Finance, the launch of the ZARU stablecoin, and how the company…
12 Mar 1PM 11 min