How to save SA from a debt trap
Covid-19 has shattered the economy, but unless a path back to growth can be found, SA will soon be drowning in debt
Government borrowing will surge after the Covid-19 pandemic, placing immense strain on SA’s public finances. If the state is unable to raise growth and reduce the deficit, SA could be headed for an eventual investor rebellion.
The SA Revenue Service estimates the country will experience a revenue shortfall of R280bn in 2020/2021. This would raise debt issuance by about 92% this fiscal year, if funded entirely out of the local bond market. It would push up SA’s bond yields even further, raising the government’s debt service costs. Already 15c out of every rand is spent on servicing debt.