John Endres
4 minute read
5 Nov 2020
4:59 pm

SA heading straight for a brick wall, foot flat on the accelerator

John Endres

South Africa is barrelling headlong towards a debt crisis: a situation where government will be unable to repay its debt as a result of having spent more money than it collected through tax revenue over a period of several years.

Picture: iStock

This year, the government is planning to spend R1.8 trillion, while collecting only R1.1 trillion in revenue. The shortfall of R700 billion has to be made up by borrowing at a rate of about R2 billion per day – the equivalent of an SAA bailout every five days. This process of getting deeper into debt is self-reinforcing. As the debt piles up, so does the interest, making it harder and harder to repay the principal amount. Worse still, as doubts about the government’s ability to repay its debt increase, lenders demand higher and higher interest rates to compensate for the...