Over the last 15 years, South Africa’s debt has surged to unprecedented levels, sparking concerns over its economic direction and international standing. Despite a global debt increase to $331.8 trillion in mid-2024, South Africa’s debt trajectory is particularly alarming, with total liabilities reaching $699.5 billion—approximately $11,099 per citizen. This translates to a debt-to-GDP ratio of 177.1%, a steep rise from 141% in 2014, placing South Africa as the 12th most indebted emerging market globally.
Government debt has been the primary driver of this surge, rising from 42% of GDP in 2014 to around 75% in 2024. Alarmingly, South Africa ranks seventh among countries with the fastest-growing government debt since 2009, a distinction that reflects poorly on its economic governance. Unlike many nations that have strategically leveraged debt to bolster economic growth, South Africa has struggled to translate its borrowing into tangible benefits. Economic activity has slowed, credit ratings have declined, and public confidence has waned.
Chief economist Kevin Lings underscores that the inefficiency in utilizing government debt has exacerbated the problem. The state’s institutional weaknesses and limited tax base expansion have compounded fiscal challenges. With unemployment at 32.1% in late 2024, increasing household debt to stimulate the economy could destabilize the banking sector, given the lack of significant job growth. South Africa’s household debt ratio, currently at 34.2% of GDP, is manageable but cannot serve as a solution without addressing the structural issue of unemployment.
In contrast, the corporate sector has maintained a relatively conservative debt profile, with non-financial corporate debt at 32.2% of GDP in mid-2024, down from 34.9% a decade earlier. This cautious approach reflects low business confidence, weak fixed investment, and prudent financial management. For context, corporate debt among emerging markets averages 93.5% of GDP, highlighting South Africa’s comparatively restrained borrowing in this sector. However, this conservatism has limited economic growth and underscores the urgent need for public-private partnerships to stimulate investment and expand the economy’s capital stock.
Lings argues that well-executed public-private partnerships could unlock economic growth and employment potential, revitalizing business confidence and fostering a more robust economic environment. However, this approach must contend with the ramifications of years of public-sector mismanagement, which has left the country with few policy options.
South Africa’s plight serves as a stark reminder of the dangers of unchecked borrowing without corresponding economic returns. As the country navigates its fiscal challenges, restoring trust in public institutions, fostering private investment, and promoting sustainable debt management will be pivotal in reversing its economic decline and safeguarding its future.
