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Finance minister Enoch Godongwana. Picture: DWAYNE SENIOR/BLOOMBERG
Finance minister Enoch Godongwana. Picture: DWAYNE SENIOR/BLOOMBERG

Is SA in a fiscal death spiral? That is the trillion-rand question in the fixed-income market if you are buyer or holder of government bonds and, more broadly, a major question for all South Africans.

If we are, if our debt balloons to unsustainable levels and we have to approach the International Monetary Fund (IMF) for help, this will undoubtedly precipitate painful change that will ripple throughout society and cause major political and social upheaval. Some say that this is the only way.

Counterpoint Asset Management has run scenarios on the outlook for the government’s finances over the next 20 years. One potential outcome is for the country to face a big structural adjustment because the debt-to-GDP ratio exceeds 180% by 2040 in the worst-case scenario.

Michael Avery speaks to Counterpoint’s head of fixed income, Daniel King.

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