#WhatSACanBe: Steps needed to tackle public debt crisis – IRR

#WhatSACanBe: Steps needed to tackle public debt crisis – IRR

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.

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.

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.

The Institute of Race Relations (IRR) has proposed a number of solutions to help avert this gathering crisis. The IRR’s latest #WhatSACanBe paper, Public Finance: Revitalise Investment, Create Jobs, presents four solutions.

These are: 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.

Previous governments have achieved this, the IRR points out.

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.”

Read the latest #WhatSACanBe paper here.

Media contacts: Hermann Pretorius IRR Head of Strategic Communications Tel: 079 875 4290 Email: hermann@irr.org.za

Chris Patterson, Researcher Tel: 063 682 5035 Email: chrisp@irr.org.za

Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za