South Africa’s Finance Minister Enoch Godongwana declared on Wednesday that the country has “turned a corner” on debt, telling Parliament that government borrowing is stabilising after nearly a decade of unchecked growth. Debt currently stands at more than 78% of GDP but Treasury projects the ratio will begin declining from 2026 onwards.
The numbers behind the shift are straightforward. Tax revenue is rising as investment in electricity generation and export infrastructure starts paying off. The economy is forecast to grow by 1.6% in real terms in 2026 and reach 2% by 2028. Global interest rates have fallen, the rand has strengthened, and foreign investor confidence in South Africa has improved enough to reduce the cost of new borrowing. Together these forces are widening the primary surplus the gap between what government earns and what it spends before debt repayments giving Treasury genuine room to manoeuvre.
The practical consequences of stabilisation are significant. Government will borrow less to fund its deficit. Plans to raise income taxes have been scrapped and most earners will pay less than before, though critics note this disproportionately benefits higher earners. With less of the budget consumed by debt servicing, infrastructure spending on electricity, transport, and water gains headroom. The share going to the social wage health, grants, and education will hold relatively steady, though in real terms total government spending will fall 2% in 2026 and 1.7% over the following three years.
The deterioration had been building since 2017. Average economic growth of just 0.6% annually through to 2023, catastrophic Covid spending, Eskom bailouts, and the institutional decay of the Zuma era collectively drove debt-servicing costs above spending on education, health, and social grants combined. That inversion is now being unwound, but slowly.
The Bigger Picture South Africa’s debt stabilisation matters beyond its own borders. As the continent’s most industrialised economy and a gateway for international capital into Southern Africa, a fiscally credible Pretoria changes the calculus for regional investors. But the Institute for Economic Justice’s warning is worth heeding: inflation-adjusted spending is still contracting, meaning the social services that underpin long-term growth remain under pressure even as the headline numbers improve.
Source: GroundUp
