According to data released by South Africa’s National Treasury last week, the country has recorded its largest budget deficit since 2004. The national debt stands at R143 billion as of the end of July versus the R115.5 billion forecast by economists. Contributing factors cited include ineffective tax collection and excessive spending.
Furthermore, according to the treasury, the budget deficit is projected to hit 6.5% of GDP in 2013, higher than the 4% estimate when the budget was presented in February. Over the last 17 years, South Africa’s national debt ballooned from R500 billion in 2006 to R4.7 trillion in 2023 and is expected to reach R6 trillion by 2025.
Meanwhile, the country’s GDP growth has been growing inversely, assuming a general downward trajectory since 2011.
To address the pressing debt, according to reporting by the Sunday Times, the country’s finance minister Enoch Godongwana is proposing huge cuts to spending, a freeze on advertising new hires, a halt on procurement of contracts for infrastructure projects, and reducing spending on non-essential travel. Although the Treasury did not suggest measures to boost revenue collection, the government is already embarking on that process, with remote workers being targeted for more stringent tax requirements.
“Given the need for urgent action, the National Treasury is left with little choice but to propose stringent measures to cabinet in respect of budget implementation and budget adjustments,” the Treasury said. “Provinces are advised to introduce the same measures for their departments and public entities. National Treasury will soon engage with the South African Local Government Association and municipalities to implement similar measures. “
The Treasury also proposed that the cost-cutting measures be effected as early as mid-September and implemented until the national debt is reigned in.