SA’s debt trajectory is on a troubled path; without drastic measures to curtail growing debt the market will eventually punish the state with a sudden stop in capital inflows. What I fear most is not just an inability to service the debt, nor the state being unable to finance its ever-increasing social needs. These are crucial, but when pushed against an impenetrable wall of capital market discipline the government will eventually be forced to cut its ever lavish spending needs, such as financing non-functional state-owned companies.

The risk I am worried about is an inability on the part of the SA Reserve Bank to respond appropriately to suppress inflation if it rises above the target. This might not be over the short-term, as the Bank has indicated that it is not worried about inflation over the next 18-24 months, but inflation will return at some point in the next cycle and the Bank’s monetary policy committee will not have the space to respond because it will be handcuffe...

BL Premium

This article is reserved for our subscribers.

A subscription helps you enjoy the best of our business content every day along with benefits such as articles from our international business news partners; ProfileData financial data; and digital access to the Sunday Times and Sunday Times Daily.

Already subscribed? Simply sign in below.

Questions or problems? Email or call 0860 52 52 00. Got a subscription voucher? Redeem it now