MMUSI MAIMANE: SA needs to urgently commit to sustainable debt management

As South Africans prepare to find out their fiscal fate when finance minister Enoch Godongwana tables the budget in parliament on Wednesday, I am reminded of Warren Buffett’s perspicacious quip: “Only when the tide goes out do you discover who’s been swimming naked.”

In times of economic malaise, the true cost of years of poor debt management, lack of economic growth and political short-termism can no longer be concealed. The tide is going out, and it’s revealing uncomfortable truths about the state’s fiscal reality.

Come what may in Wednesday’s budget speech, national debt will remain an albatross around our necks without a “tough love” debt management strategy.

There is an ever-worsening debt crisis in SA. The country’s ballooning debt-to-GDP ratio, now teetering near 76%, is a clanging warning bell. If ignored, it could choke off all aspects of growth and development we seek to accelerate.

SA’s debt service costs will reach R440.2bn in 2026/27. As a line item, it is more than we spend on health, policing or basic education. That means every rand borrowed today must be repaid tomorrow by a generation that may inherit fewer jobs, slower growth and shrinking social protections.

To arrest this trajectory, we urgently need a clear, credible, and sustainable national debt management strategy. It must act to trim fat, while structurally repositioning how government borrows, spends and repays.

This strategy requires at least five elements that, if implemented in a holistic package approach, would have a lasting and tangible affect on the economy.

First, the National Treasury should set a formal debt ceiling or anchor, benchmarked to a sustainable level such as 60% of GDP, with automatic corrective measures triggered when breached. While flexibility is important, predictability builds investor confidence and disciplines political decision-making. This anchor should be enshrined in fiscal policy as a guardrail against decline.

Second, target borrowing for productive investment. It is trite that not all debt is equal. SA must distinguish between consumption debt and productive debt. Consumption debt such as bailouts, public sector wages and interest payments is too regularly procured and too readily relied on.

Productive debt that drives long-term growth — infrastructure, energy security, digital access and education reform — however, is required in a developing economy such as ours.

A new borrowing framework should restrict net new debt to growth-enabling capital projects, with transparent cost-benefit analyses. State-owned entities should be barred from borrowing on state guarantees unless projects meet clear commercial return thresholds.

Third, reprofile existing debt to ease the burden. SA should accelerate efforts to reprofile its debt portfolio. This is achieved through negotiating longer maturities, lower interest rates and reduced rollover risk. Multilateral lenders, climate finance instruments and debt-for-development swaps offer potential relief. The Treasury must use its negotiation leverage to secure better terms and create breathing room for reforms.

Fourth, to enhance transparency and accountability, parliament should legislate the creation of an independent fiscal council. The council would be a non-partisan watchdog to monitor government spending, debt targets and budget forecasts. Independent oversight will reduce political short-termism and boost market confidence.

Finally, curb waste and rebuild credibility. Debt reduction won’t come from growth alone. It requires growth and real expenditure discipline to march in lockstep. This means freezing luxury spending on ministerial perks, rationalising failing SOEs and tightening procurement. Every rand saved is a rand we don’t have to borrow.

But more than cost-cutting, it’s about credibility. Investors lend to countries they trust. That trust erodes when public funds vanish into corruption or are used to plug policy failures. Treasury must be ruthless in cutting off wastage and enforcing consequence management.

SA doesn’t have a revenue problem alone; it has a spending and structural reform problem. Without a shift in approach now, we risk drifting into a debt trap that limits our sovereignty, deters investors, and burdens future generations with yesterday’s failures.

The budget indicates the economic and fiscal reality but also has the ability to decide what the medium term can achieve through spending patterns. The tide is quickly moving out, and SA needs to turn it quickly and responsibly. A credible, enforceable debt management strategy is the first step to turning the tide.

• Maimane is chairperson of parliament’s standing committee on appropriations.