Red lights are starting to flash over debt
While government interest costs to GDP have more than doubled, the private sector too has overindulged in the availability of relatively cheap debt
Most people would agree that debt, if used wisely, can be a valuable financial tool. But as the famous economist John Kenneth Galbraith warned: “All crises have involved debt that, in one fashion or another, has become dangerously out of scale in relation to the underlying means of payment.” Even though overborrowing was one of the primary causes of the 2008-09 global financial crisis, in certain spheres debt nowadays is approaching or surpassing crisis levels. In SA, over the past 10 years the government has taken on more debt and allowed state-owned enterprises (SOEs) to lever up their balance sheets. The private sector, too, has overindulged in the availability of relatively cheap debt, often with grave consequences and the loss of billions of rand in value on the JSE. PODCAST: Understanding the vulnerability of the JSE. Subscribe: iono.fm | Spotify | Apple Podcasts | Pocket Cast | Player.fm In 2008 SA could boast a comparatively low debt-to-GDP ratio of 28%, below emerging marke...
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