Tackling South Africa’s mounting debt crisis is central to achieving gains in economic growth and job creation, says the Institute of Race Relations (IRR)/
In the latest of its #WhatSACanBe reports, Public Finance: Revitalise Investment, Create Jobs, the IRR urges to Government of National Unity (GNU) to set itself four key targets: achieve a clear primary surplus in the first year; protect social grants from cuts; commit to nil tax increases; and ensure that government departments boost their efficiency while keeping the public purse tightly shut with limits on spending.
In a statement, the IRR points out that South African public finances are in crisis and government debt is unsustainably high. For every Rand paid in tax, more than 20 cents goes to covering debt costs.
“This is all a consequence of South Africa’s decade of low economic growth and the country’s unsustainable habit of spending more money than it has. This has put the country on a path to crisis, which affects services such as health care, education, and social spending – the core of public spending.”
The IRR notes that debt reached R5.2 trillion in 2023/24.
“To put this in perspective, if this debt burden was shared equally among all 63 million South Africans, everyone would owe about R82 000.
“This risk is recognised by the Government − in the 2024 Budget Review, National Treasury noted that “rapid growth in debt service costs chokes the economy and the public finances”. And over the next three years, the Government of National Unity will spend more than R300 billion per year on servicing debt. That is more than what it will spend on health care over the same period. Nearly a quarter of government revenue, i.e. the tax contributions of ordinary South Africans, goes to paying interest on the debt.”
Says IRR researcher Chris Patterson: “After years of letting South Africa’s debt spiral to unsustainable heights, the public deserves a penny-pincher government. South Africans deserve to know exactly how, when, and where their money is spent. Gone should be days when organs of state overspend.”
Patterson adds: “Fiscal responsibility is important for a number of reasons. It also helps curb corruption and ensures that South Africans receive bang for their tax buck. However, this alone will not be solution enough. The GNU must also grow the economy through incentivising investment by securing property rights and ditching pro-poverty policies like NHI, BEE and EWC. This will also help the GNU convince South Africans to trust its commitment to creating employment and economic opportunities to improve income and livelihoods.”
You can read the latest #WhatSACanBe paper here.