Government finances on the brink of disaster

Alarming drop in tax revenues and ever-growing expenditure are sending debt to unsustainable levels.
The tax take in the current tax year is expected to be R300bn less than the forecast presented in the February budget. Image: GCIS

It’s safe to speculate that few people envy Finance Minister Tito Mboweni his job, and it is even safer to guess that no sane and honest person would like to take it on.

This much is clear from the figures in the medium-term budget that Mboweni tabled in parliament on Wednesday, as well as the intricate juggling act as he tries to keep everybody happy.

In short, the SA government is running out of money with revenue from taxes falling far short of the continuing increase in government expenditure.

Mboweni said in his budget speech that “we cannot allow our recent fiscal weakness and the pandemic to turn into a sovereign debt crisis”, saying that “today the government sets out active measures to avoid this risk”.

“We table a five-year fiscal consolidation pathway that promotes economic growth while bringing debt under control,” said Mboweni.

The major problem remains the global recession brought on by the Covid-19 pandemic and the uncertainty of economic recovery.


The finance minister reiterated that the SA economy is expected to contract by 7.8% this year and recover by only 3.3% next year, and took the time to mention that his fellow parliamentarians and citizens must realise that this 3.3% growth is off a very low base.

A short presentation included in the budget documents states that National Treasury expects the economy to grow by an average of 2.1% per annum over the three years covered by the medium-term budget.

The figures indicate that this paltry economic growth – if SA can actually achieve it – is not nearly good enough to raise enough taxes to fund the current trajectory of government expenditure.

Mboweni spelt it out clearly: “Madam Speaker, we must be careful to avoid the fate of countries like Argentina and Ecuador that defaulted on their debt this year. Countries that find themselves in default see sharp GDP contractions and currency depreciations.

“On current trends, more of our taxes are being transferred to bondholders, rather than to critical services for our people. An uncontrolled increase in borrowing costs would harm small businesses, ordinary South Africans, and the poor the most.”

The budget shows that Treasury has reduced its estimates of revenue from taxes significantly for each of the next three years compared to previous projections.

Revised revenue projections
R billion 2020/21 2021/22 2022/23 2023/24
2020 budget 1 425.4 1 512.2 1 609.7
Revised estimates 1 112.6 1 279.5 1 392.2 1 503.2
Change since 2020 budget -312.8 -232.7 -217.5

Source: National Treasury

The tax take – government revenue is a misnomer indicating that government does something worthwhile to earn it – is expected to decrease by more than R300 billion in the current tax year compared to the forecast presented only a few months ago at the time of the tabling of the 2020 budget.

Similarly, revenues for the next two years are expected to be lower by more than R200 billion in each of the next two tax years, also in comparison with the 2020 estimates.

Treasury points out that while SA does not compare badly with other developing countries as far as debt levels are concerned, its debt-to-GDP ratio is increasing at the fastest rate – by far.

“Interest payments [are] absorbing a growing share of limited public resources, which increasingly crowds out spending on social and economic investment. Debt-service costs are now 4.8% of GDP, up from 3.3% in 2016/17,” according to Treasury’s report.

Treasury also warns of a deteriorating government balance sheet, including state-owned companies and municipalities that are struggling to pay salaries and other operational costs. “Options to stabilise the fiscus are becoming increasingly limited,” it says.


It is unclear how government plans to cut expenditure.

Mboweni made quick, vague reference to talks between government and government employees to discuss the growing wage bill, and praised President Cyril Ramaphosa’s economic recovery plan as a solution to our woes.

In essence, the plan promised thousands of new government jobs and public work projects to kick-start the economy.

“Over the past five years, public sector employee compensation grew by 7.2% a year on average – well above inflation. Over the next five years, it will need to grow much, much slower,” warned Mboweni.

How best to adapt

“The Minister for Public Service and Administration and the leadership of the public service unions are meeting to discuss how best we adapt to the reality that we must do more with less, and that we are all in this together,” he said, contrasting government departments with the private sector, which was forced to cut salaries and working hours due to the coronavirus pandemic.

Nevertheless, a table in the presentation accompanying the budget speech shows that government expenditure is budgeted to increase from R1.85 trillion last year to R2.04 trillion in 2020/2021, but then drop to R1.99 trillion in the next budget year.

Consolidated government fiscal framework

R billion 2019/20 2020/21 2021/22 2022/23 2023/24
Revenue 1 518.1 1 276.7 1 457.6 1 595.8 1 705.7
Expenditure 1 848.7 2 037.8 1 993.5 2 079.6 2 139.2
Budget balance -330.6 -761.1 -535.9 -483.9 -433.4
Total gross loan debt 3 261.3 3 974.1 4 551.8 5 071.3 5 536.2

Source: National Treasury

While the table shows a decrease in the budget deficit over the next three years, gross loan debt is expected to increase from the current R3.9 trillion to R5.5 trillion by 2023/2024. Mboweni highlighted this in his budget speech.

It is noteworthy that for some reason the revenue projections in this table are around R200 billion higher every year than the revenue expectations mentioned by Mboweni in his speech, and the growth in government debt thus somewhat lower.

The budget had few surprises with regards to government expenditure by government function over the next three years. Education remains the top priority, followed by spending on social services.

Despite lower interest rates, also alluded to by the finance minister in his address to parliament, interest payments have increased.

Interest on government debt over the next three years will be higher than the amount government will spend on health services for citizens.

Spending priorities

Total spending 2020/21 to 2023/24
R billion
Learning and culture 1 217
Social development 978
Debt-service costs 942
Health 724
Economic development 703
Community development 690
Peace and security 638
General public services 213
Contingency reserve 15

Source: National Treasury

The lasting impression of Mboweni’s budget is that SA is in financial trouble.

He warned that if estimates for total government debt are wrong, the risk is that it will be higher.

He diverted from his written speech to issue a warning about financial prudence: “There is no room for seepage.”

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Was thinking last night that I haven’t woken up to one good piece of local economic news in over ten years. After rereading the MTBPS and listening to economic commentators, I have hit an all time low. Even with citizens best efforts, we actually can’t recover from this mess.

I hear what you say and agree with your sentiments.

However many people has seen this coming 10 years ago and have shifted their investments offshore. A default wont really harm them and a tanking currency might make things a bit cheaper??

Just saying.

You’re right, but it also sounds like you had the benefit of earning and investing during the SA glory years. I am 30, and most people my age haven’t experienced the fortune you have, of working in a thriving local economy.

@Stuartsa. I was not very successful in the “local thriving” economy post 1994 for obvious reasons.

I found thriving economies outside of SA where I could meaningfully participate with no discrimination. I did that for about 2 decades and my small consulting company currently only does work offshore. Again for obvious reasons.

Maybe there are other options for you out there. Don’t wait another 10 years. I don’t see why the news are going to get better anytime soon.

@stuartsa : at age 30 I suggest that @stuartaus would be a better option /solution.At age 30 it’s the right timing .
Good luck.

live local, earn global.
SA will remain a reasonably good place to live for a while still, you just want to be an expat for the forseeable future.

How would a tanking currency make things like petrol cheaper when oil is priced in USD?


Lets look at petrol in January 2000. Price in ZAR = R2.85. ZAR/USD = R6.72 so If you paid with your USD it would cost $0.424 per liter.

Today. Petrol price = R14.16 per liter and ZAR/USD = R16.42 so if you paid with your USD it would cost $0.862 per liter.

So Petrol price in ZAR increased by 397% and the same petrol in USD only increased by 103%. Big difference.

Maybe its the 9th wonder of the world.

To recover, we’d need a nimble State governance framework with light-touch regulation, willing FDI to accomplish rapid re-industrialisation, an incorruptible civil service and moderate taxation.

So we’re effed.

Exactly. Since the ANC loves name changes, they should seriously consider changing ‘South Africa’ to ‘South Zimbabwe’. It would be a perfect fit.

To make it worse, the whole budget house-of-cards is built solely on the premise that government will win the pending (and guaranteed future) court case against the government labour unions. If that card falls…

@stuartsa, I feel your sadness and frustration. I’m in my mid-30’s, and while I’ve been lucky to be a touch older than you, and be able to ride at least one mini property wave in my short life, we certainly haven’t had the run that our parents’ generations have had, with strong property and capital/investment appreciation since democracy.

As with anything, though, despair just drags you down – we have to take the situation in hand. My suggestions to you, from personal experience and from the experience of many clients, are:

1. Start an aggressive lifestyle expense cut-back, immediately (a la Stealthy Wealth). It might seem ludicrous, but there is always a way to live on just half of what you make – even if that means extreme measures like selling your car and buying a scooter to get to work, or moving back in with your parents/taking on housemates. If you can do this for even just a year or two – before the doodoo properly hits the fan in SA – you’d be able to build up a notable little nest-egg.

2. Couldn’t agree more with @Mmmm about looking overseas. Although my advice would not be Oz – weather’s the same, sure, but that’s about the only real comfort or benefit. It’s long-haul to everywhere, and the cost of living in anything resembling a city is eye-watering. Instead, let me suggest one of the greenest, happiest places in the world: Ireland. I have residency there, and let’s just say they are *far* superior when it comes to friendliness as a visa/working destination, and also know how to attract investment and talent (low tax rates, less hostile Immigration policies, etc.) Their economy is taking a hit at the moment, but with a strong and disciplined Treasury, they’ll bounce back. The cost of living is also on par with SA if you live outside of Dublin (my advice: look at the South East for the best value rentals and properties). It’s also the only country in Europe which South Africans can visit without a visa in advance, so apart from time-zone bonuses, it’s also much easier for friends and family to come visit.

3. Apart from investing in a scoping visit to Ireland once borders open, invest in your skill set – and particularly, look to develop digital skills that travel well. Depending on your area of expertise (or skills that you choose to work on) you could even pick up a few remote clients in Ireland/Europe before making the jump. To an Irish company, a EUR200-300 retainer is chicken-feed, but that’s not to be laughed at in Rands if you have a few of them as a side-hustle.

I could go on and on, but start there, and see how you go. Always open to questions if you have.

@stuartsa It would be better to properly investigate several countries and specific regions within them than to gamble all on one – if you possess the means.

Not everyone likes the same country and environment. I for example tried to like the UK but after 5 attempts I was forced to conclude it wasn’t for me. When emigrating to Oz I was told similar to the above but that I must go to Sydney. I defied such advice and am better for it. Point being that others might think the opposite to any point but that’s also their own preference and path to happiness.

If you’re willing to start the journey of looking overseas then don’t just look to the UK, Ireland and Oz. Investigate NZ and Canada as well; even seemingly strange options like Panama . Don’t like Toronto In Canada, well what about Vancouver? Don’t like Auckland, well what about Hamilton? Don’t like Sydney, well what about Brisbane?

@stuartsa. I also echo others’ comments.

One also has to bear in mind where SA is positioned in a historic/strategic sense: SA’s economic heydays were in the colonial gold rush days (prior 1980’s). We are now in a ‘post-colonial’ era. It is expected that things will gradually decline, based on a western mindset/value system.
Skills have been leaving SA, and this manifest itself is the daily “frustrations” to get certain things done (or done right) whether one is dealing with Govt, SOEs, Munis, or private-sector business.

Make the cake bigger, then everyone will be better off, and we will not have to borrow so much. Government should not control the economy, they suffocate every business with more and more laws.

…the ANC will not have the foggiest idea what you’re talking about (not the political will).
I 100% agree with what you say….allow the ‘invisible hand’ of the private-sector economy to thrive; govt to interfere less in business, and all positives that flow from that.

Don’t worry. We will get some has been rock star like Mick Jagger to plead for the write-off of our debt and make it seem fashionable. And then we’ll start borrowing again.

The ANC having any clue what to do with finance is the same as a plumber about to do a brain surgery.

Only economic growth can get us out of this mess. We can have real economic growth of fake economic growth. Entrepreneurial activity, risk-taking, the profit motive and property rights drive real economic growth. Runaway inflation, or devaluation of the currency rather, drives fake economic growth. The Debt/GDP ratio improves, not because the level of debt is lower, but because the nominal value of the GDP is increased through inflation.

Socialist rent-seeking, infringements of property rights, redistribution of property through various taxes on capital and myopic economic policy lead to a shrinking economy and a crash in the GDP. The ANC will not change its socialist policies. They cannot afford to abandon BEE policies, the Mining Charter, redistributive municipal rates and taxes, cadre-deployment at SOEs and central planning of the economy. The ANC policies prevent the economy from growing and lead to a shrinking economy as the pie is cut up in smaller pieces.

This leads to the inevitable situation where the purchasing power of the currency will be used to create fake economic growth.

WHY are we surprised? WHAT did govt EXPECT as a result of a long and hard lockdown??

Those images in the media (after 27 March) of SADF-soldiers being employed to enforce curfew…I thought to myself….”these soldiers (upon orders) are severing economic activity that is in fact the source of govt employees income”. “It’s going to bite these guys in the buttocks.”

Since lockdown, the country witnessed private sector jobs being bled/mauled.

Well then, DO NOT CRY when it’s now Govt’s turn to feel monetary pain.

(…and yet, when you think Govt is battling with reduced revenue, you WILL in future come to read in the media of this and that gigantic corruption events that are to still to surface, we don’t yet even know about at present)

With the budget yesterday my suspicions have been confirmed. That the ANC will continue talking about the debt crisis at though it still is something distant and avoidable, while continuing to think they can spend the economy out of collapse. Government spending can never sustain the economy. Many people are quick to point to the advanced economies whose governments have also poured massive amounts of stimulus into their economies, but people fail to realize that this is only to buy time. Once the Covid crisis ends the advanced economies will likely go into a small period of massive growth and their governments will then be able to stabilize spending and debt again.

South Africa will experience limited growth for a couple of years before settling again into a declining economy. This means the tax base will continue to be eroded and the deficit will continue to grow until the point of default. The government will then blame the imperialists for the economic collapse and will most likely start printing money to continue paying civil service and grants. This will result in hyper inflation and result in Zimbabwe 2.0 playing out.

Many say this is too pessimistic a view, but the government is giving no signs that they actually understand the magnitude of the problem, nor are they showing any real signs of trying to change course. Luckily I have already financially emigrated and will soon physically also emigrate. I applaud Cathy Buckle for her commitment to Zimbabwe and its people, herself still having somehow pride in being a Zimbabwean no matter what the government of the day do or say. But it is sad to say and admit, but I no longer have any pride in being South African. The sad reality for me is that the South Africa that I once hoped would someday come to fruition will now never come to fruition, or at least not in my lifetime.

…you’re not a pessimist, but only a realist.

I agree with all you have said.

One point I will add is that I think there will be a regime change in both South Africa and Zimbabwe once South Africa collapses. Zimbabwe is artificially supported by South Africa, with most of it’s labour force working here and sending money back home.

Once the South African tap turns off, there are going to be a lot of hungry, angry people in Zim.

Grateful thanks to the glorious movement. There are various movements take your pick………….

Now that I have smoked my socks a bit, I was just dreaming about ALL the dosh that was stolen and wasted. Just imagine if we still had it all.

jobs, houses, toilets, low taxation, hospitals, medical health, a national airline, low petrol price, abundant energy, functioning happy civil service, free education from grade R to PhD.

Mboweni’s humour and bailouts in his speech point to the fact that he and his adminstration are completely oblivious to the wreck and ruin his party has wrought on the economy over the past 25 years. We now have a situation where only 15% of the nation are actually working, and the country is totally bankrupt. Any idiot can see that drastic actions must be taken. His budget projections are not worth the paper they are written on.

The runaway train of economic destruction is unstoppable. When exactly does disaster strike or is it a slow demise like Zimbabwe?

Dear #Imstaying, that light that you can see at the end of the tunnel is behind you, turn around, face forwards and all you will see is darkness.

Are those #Imstaying, those numbnut SJW/woke/multi-pronoun idots who wear anglewings with the South African colors

Bunch of Tik-heads

Dear Stuartsa and others. I am 50 and could afford to leave but agree with earn global live local. All 4 my siblings had a stint of a year or more elsewhere and they are all back.

My kids are considering Ireland.

Go and read Alec Hogg interview with Rob Hersov. I plan on tracking him down and seeing what I can do to help. He has a plan and the funds to implement it.

End of comments.




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  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products Jan 2021 3.20%
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