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National debt soars to apartheid-era levels

But what does it matter?

The country’s national debt, as measured by gross government debt as a percentage of GDP, is estimated to reach levels last seen in the early days of our democracy when the Mandela administration dealt with the hangover from apartheid.  

Years of economic sanctions in opposition to the old regime had ravaged the economy and led to the country’s debt being downgraded to junk status. This saw the ratio of debt-to-GDP peaking at 48% under finance minister Chris Liebenberg (see graph below) in President Mandela’s second year in office.

It then fell sharply under the tenure of Trevor Manuel as finance minister, eventually bottoming at just 22% in 2008 and 2009, just as the global financial crisis hit. When finance minister Malusi Gigaba stands up to deliver the budget speech in February next year, National Treasury estimates debt-to-GDP would have reached 47%.

*You have to have given a budget speech to qualify. 

But what does it matter? Many other countries have debt-to-GDP ratios far in excess of our own? And why, in the context of a developmental state like South Africa’s with so many pressing issues are we concerned about a ratio of this nature?

Perhaps this next graph can explain things further.

Source: Moneyweb/National Treasury

The blue line represents debt service costs – or interest – as a percentage of the country’s total tax revenues. (The database accessed from National Treasury only went as far back as the 2001/02 financial year that ended in March 2002).

By this stage, Manuel had been in the hotseat for approximately five years already, and had lowered debt-to-GDP from 48% to 33%. But look at that number! Virtually one in every five tax rands collected (19%) went just to servicing the national debt. 

Unlike Trevor Manuel, who had a boss that understood the importance of managing the fiscus prudently to run down the cost of borrowing and lower the quantum of money paid to service the debt, Malusi Gigaba, in my opinion, does not have the same luxury.

In his first press conference as finance minister, Gigaba reiterated government’s commitment to fiscal consolidation – in other words, managing the country’s affairs in such a way that debt does not spiral out of control. His problem is that he has a boss that doesn’t understand or believe in the importance of being fiscally prudent such that, in the Zuma years, debt service costs have risen from R57 billion in 2010 (Zuma’s first year in charge), to a projected R162 billion by the end of March next year, equivalent to 13% of all tax revenue collected.

What is prudent? Maximising debt while keeping the cost of it at its lowest sounds like the logical conclusion. But the real magic is being able to allocate the money in such a way that the marginal returns – whether they be social or economic outcomes – exceed the cost of the money that has been borrowed. And that is an extremely hard argument to make given the current leakages in the system.

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We haven’t completely considered the vendor financing model that is a recent trend. The costs may be even higher in the long run. If Rosatom provides funds to bankroll a nuclear build, junk status is a non-sequitur. We can only hope there’s a taker for SAA too.

For Malusi “the fool” Gigaba the obvious and only solution under investigation is “tax morality” – getting taxpayers to pay more. May I suggest to him that his commission of enquiry should rather investigate the “tax morality” of the tax spenders. Fixing that would automatically improve the tax morality of the taxpayers greatly.

The idea is that we will borrow from the Russians and have to pay them back with interest (which won’t come cheap). Imagine having Putin & friends as your creditors for the next 50-60 years ….But do you think Zuma cares? He cares less about his legacy or his reputation than any gang leader on the Cape flats cares about selling drugs to your kids. He is in it for himself and he couldn’t care less. That is the type of president which we have.

Question:

Why would Putin lend money to a bankrupt country such as SA will be asap?

International Capital brought down old Apartheid and its corruption, and International Capital will bring down the new Apartheid and its ANC corruption.

I am sorry, but in my opinion it is unfair to blame apartheid for the increase of debt to 48% under Mandela. When the ANC got into power they started paying enormous salaries for jobs which were previously done either voluntarily or the remuneration was nominal, like city councillors. Increasing the number of provinces and creating large number of new provincial MPs with large staff and high salaries was a simple way of providing jobs for pals. It all went down from there. Under apartheid the debt was only around 30%.

How is it possible that you can mention the debt peaking when Madiba was in power at 48%, and not notice the increasing trend all of the years before that under apartheid, and then the downward trend all of the years after that until 2010. To put things into perspective, there were no complaints when those in power under apartheid got huge salaries or when they employed their friends and cousins. Under apartheid, there was no need for that many staff, because service delivery was only needed in former white areas. Maybe the change in focus and the need for equality meant that it was necessary to create more jobs so that all of us had some sort of service delivery. This current government is useless at best, and Zuma is ruining this country, but there was good work and huge progress made under Mandela and Mbeki. To many that may not be evident, but building roads, providing more running water and electricity and better schools in the townships took lots of investment….. But you would never know that if you were blind to how others live around you….

Point is that they did NOT get big salaries; and where is the evidence of appointing friends?

Point is that blathering on about pre-1990 is just a strawman argument and has zip to do with Sa after 1999.

The fact that you think that there was no nepotism or corruption under the old regime just shows your own ignorance. Institutionalised racial segregation and discrimination affecting 90% of the population for half a century plays no role in todays SA? Really? Pre 1990 has everything to do with current day SA. and it will continue to affect this country for decades to come.

@Jay2000 – did you forget to take your pills this morning ???

Please !!!!

I lived in SA for many decades prior to ANC takeover

Yes, of course there was corruption/nepotism etc in apartheid govt

Just like there is in the USA and all governments around the world

HOWEVER, get this into your head, THESE GOVTS ALL FULLFILLED THE GENERAL DUTY TO THE COUNTRY FIRST, and then skimmed for themselves

One cant even BEGIN to compare life in SA before ’94, and after

And I’m talking for everyone here [ blacks/indians etc ]

Blacks now, per GDP% are POORER then they were before the cANCer took over !!!

Period

Go do basic math, and study the economic reality as it is now

And, ITS GONNA GET WORSE !!!

Especially for the same class, as under apartheid

The reality is, Zuma and his black brothers have scre*d his own ppl over MORE than any apartheid govt

And right now Verwoerd and his ilk are laughing from their graves….saying:

We told you so !!!!

So, please stop trolling on behalf of cANCer, take your head out from the sand and look around you!!!!!!!

A truism….if we don’t learn from history we repeat history’s mistakes.

Go back to 1992 when our economy was in a shambles. Derek Keys was appointed minister of finance, former CE of Gencor and a man with a remarkable ability to say complex economic concepts in simple terms so that his audience could grasp them.
To him the basic requirements were so self evident that it is said that he introduced himself as “the minister of the obvious”. Keys said there were 6 guiding principles; intensive skills training especially in the trades; stability in prices, interest rates and exchange rates;fiscal discipline; promoting effective competition in the markets and strengthening market forces.

Keys’ advantage was that he had a knowledgeable person as president whose own interest was long term stability for RSA in the person of FW de Klerk. But with Ramaphosa as president it becomes a distinct possibility.

But this is not about putting our hopes in a “messiah”. That’s where we went wrong with Mandela. Remember it was under his watch that Pahad sidled up to the Guptas. The task is to move away from personality cults and explore the path to the shared values that will rescue this country from disaster.

This is purely anecdotal, but I have a couple of self employed friends who have been doing really well over the last couple of years and months.

This, notwithstanding the economic doom and gloom.

Just imagine the potential in South Africa, a big population in need of food, clothes and housing. If you can supply, there is a demand.

Stay positive and create your own economy, so to speak.

You are right. The margins for the entrepreneur expands as the infrastructure and rule of law deteriorates. This is how the consumer, who also happens to be the voter, pays for his mistakes.

This ANC-Government resembles an apartheid-era government.

Either you do not know the ANC-led government, apartheid government or both.

In fairness I should have said Zuma-led ANC. Both ANC, under Zuma, and the National Party-led Apartheid Government rule with hate-filled, racial bitterness and poor fiscal disciplines (Zuma-era again) that the population must ultimately pay for. The inability of Black South Africa to resist the destruction of this country under the Zuma criminal syndicate is astonishing. The same phenomenon (I guess) as those Whites who did not oppose Apartheid.

Colson: nonsense fullstop.

Nothing what they have done is astonishing.

@Jay2000 said:

“Pre 1990 has everything to do with current day SA. and it will continue to affect this country for decades to come.”

Here we go again.

Yawn

Same libtard thinking

Please, ever hear of the Japs becrying the fact that they had 2 atomic bombs blow them to bits in addition to the ravages of war leaving that country in tatters ?

No – got together and rebuilt the country in a few decades to a SUPERPOWER

Same with Germany !!

Same with the Jews…….same with Afrikaners who had so many odds stacked against them

Maybe its genes ?…who knows….either way nobody there blamed the past – THEY ROLLED UP THEIR SLAVES AND CREATED ECONOMIC POWERHOUSES !!!!!

But, just like you, in 25 years the lazy entitled locals will STILL be blaming apartheid

Just like Mugabe….and the rest of Africa still blaming the colonialists who left donkeys years ago !!

Catch a wake up @Jay2000

Time to arise from your self induced left wing coma.

What Tax morality when the “President” does not pay Tax?

Apparently he owes SARS R63 Million?

Nothing new, no new news here. Worse to come.

The ANC is not perturbed by bankruptcy.

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