Debt servicing costs more than 20 percent of revenue: Godongwana

Government notes that South Africa’s debt is expected peak at 75-percent of GDP next year which is lower from a previous projection of 77-percent.

In this context, the country’s debt is expected to increase from the current level of R5-trillion to just over R6-trillion over the next three years.

Finance Minister Enoch Godongwana, during his Budget Speech, says the cost at which government can borrow remains high due to risks stemming from prolonged power cuts and rising debt stock.

“The higher budget deficit means that debt-service costs in 2023/24 have been revised higher, by R15.7 billion to R356 billion. Debt-service costs will absorb more than 20 percent of revenue. To put this into perspective, spending on debt-service costs is greater than the respective budgets of social protection, health, or peace and security. ”

Economic growth

National Treasury estimates that the economy will grow by only 0,6-percent in 2023 mainly due to intensive and persistent power cuts, while growth is projected to reach 1,3-percent this year.

Government notes that continued operational and maintenance failures in electricity, freight rail and port remain a persistent and binding constraint on output in the near term.

“South Africa’s near-term growth remains hamstrung by lower commodity prices and structural constraints. We estimate real GDP growth of 0.6 percent in 2023. This is down from 0.8 percent growth estimated during the 2023 MTBPS. The revision is due to weaker-than-expected outcomes in the third quarter of 2023, particularly in household consumption and fixed investment.”