JOHANNESBURG – Data from Statistics South Africa (StatSA) showed that the government’s gross loan debt stood at R2.2trillion in 2016/17 financial year, translating to about R40000 per person living in the country.
Finance Minister Tito Mboweni in February said that the government was borrowing about R1.2billion a day.
StatsSA analysed government spending over 13 years, focusing on how much citizens pay to service the debt. StatsSA said since 2007/08, the government has consistently spent more than it earns.
“The deficit in 2016/17, for example, amounted to R156bn. It should be noted that a budget deficit is not uncommon across the world and should not automatically be seen in a negative light. Countries generally borrow money to cover financial deficits so that they can provide services to their citizens,” StatsSA said.
“If state expenditure is taken as a measure of better times, there was a three-year period (2005/6 to 2008/9) when government spent less than it earned, enjoying a surplus over that period.”
The 2019 Budget Review document said main Budget fiscal deficit was expected to widen to 4.7 percent of gross domestic product (GDP) in financial year 2019/20. To finance the deficit, gross loan debt was projected to rise to R2.8trln or 56.2 percent of GDP 2019/20 and stabilise at R3.5trln 2021/22 or 58.9 percent of GDP.
According to data from the International Monetary Fund South Africa devoted a larger proportion of its Budget to paying interest than other countries such as Russia and China.
Capital Economics economist John Ashbourne said wider fiscal deficit projections are as a result of measures to deal with the financial troubles of Eskom and other struggling state-owned companies (SOEs).
“Much of the worsening of the budget deficit is due to expenditure pledged to support state-owned energy firm Eskom,” Ashbourne said.
South Africa’s worsening fiscal measures have stoked fears that Moody’s will next week downgrade the country’s sovereign rating.
The move would result in South Africa being removed from the benchmark local currency World Government Bond Index.
This could lead to an outflow of capital from the bond market, pushing yields up and putting the rand under pressure.
Investec chief economist Annabel Bishop said market participants are eyeing Moody’s South Africa rating review on March 29.
“South Africa has seen a substantial series of credit rating downgrades over the past ten years on the deterioration of the government, and key SOEs finances (and hence perceived creditworthiness), while economic growth has slowed materially from close to 5.5percent year-on-year to closer to 0.5percent year-on-year over the period, also elevating fiscal debt and deficit ratios,” Bishop said.