South Africa’s debt crisis is worse than you think

New research from the Bureau for Economic Research (BER) shows that South Africa’s debt levels are much worse than the government reports, even going over 100% of GDP in some cases.

This is because there are various types of debt that are not included in the reported numbers — such as the contingent liabilities attached to state-owned enterprises — which could be giving an incomplete picture of the country’s debt crisis.

The latest budget tabled by Finance Minister Enoch Godongwana tells an optimistic tale of stabilising the country’s debt over the next few years.

This sees the country increasing its debt-to-GDP ratio to 77.4% in the 2025/26 financial year, and then experiencing a gradual drop-off in the years that follow, hitting 76.6% in the MTEF period.

Economists have already pointed to some deep problems with Godongwana’s forecasts. For one, the projections rely on consistently hitting budget surpluses at a rate not seen in 100 years.

Renowned economist Dawie Roodt has also pointed out that the promise to stabilise debt has come each year, but the National Treasury has never actually delivered on it, consistently pushing it back.

According to the BER, one of the biggest problems, however, is that there are many ways to tally up a country’s debt—and South Africa’s methodology is arguably one of the least comprehensive.

Research compiled by independent contributor to the BER, Robert Botha, shows that South Africa’s debt-to-GDP ratio could be as high as 129% when considering the widest definition of debt.

However, the definition doesn’t need to stretch much further than including South Africa’s struggling and failed state companies to show how much deeper the crisis goes.

South Africa’s Debt-to-GDP ratio estimates, May 2025

According to Botha, South Africa’s debt ratio is considered central government budgetary debt, debt securities, and loans.

This gives the reported projection of 76.9% in the latest budget, with a peak of 77.4% in the coming year.

However, this encompasses only three of 13 components of debt coverage considered by the IMF’s Debt Sustainability Analyses — one of the narrowest among many of South Africa’s peer countries.

Looking at the widest definition, the IMF estimated that South Africa’s total consolidated gross public sector debt amounted to 131% of GDP in 2021/2022.

The South African Reserve Bank’s estimation of total consolidated gross public sector debt amounted to 129.2% of GDP as of the third quarter of 2024. On a net basis, the debt-to-GDP drops 98%.

Taking total public sector debt into account is on the more extreme end of the debt assumptions.

But even when not going that far, one critical component is left out of the standard definition: state-owned entities.

Roodt has long argued that South Africa’s debt crisis if far deeper than the government lets on because of the country’s failing SOEs.

The BER’s data reinforces this, saying debt as reported by the National Treasury could be adjusted to partially or fully account for contingent liabilities tied to SOEs.

Contingent liabilities are state obligations and guarantees that could result in expenditure if specific events occur. As such, these are possible risks to a country’s debt burden.

“Depending on the risk profile of a country, debt figures are sometimes adjusted in risk assessments by rating agencies,” Botha said.

South Africa has massive contingent liabilities attached to state companies, mainly consisting of guarantees.

From 2004/05 to 2024/25, contingent liabilities increased from R15.9 billion to R1.1 trillion. The two biggest contingent liabilities are Eskom’s debt and claims against the Road Accident Fund.

This past week, the government added another R51 billion in guarantees to Transnet.

When taking these liabilities into account, South Africa’s debt shoots up to 92.5% of GDP.

One positive spin on the numbers

Botha noted that just as the debt figures can easily be adjusted upwards to include detrimental factors, there is also an argument to be made for the opposite as well.

Specifically, if the National Treasury adjusted for the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), it could show a more positive debt-to-GDP ratio of 69.2%.

“Effectively, the GFECRA operates as a second cash buffer. In years where the account sustained losses, including the GFECRA in the net debt calculation, would increase net debt,” Botha said.

“However, in years where the account made ‘profits’, including the GFECRA in the net debt calculation would reduce net debt.”

As the account started to accumulate from around 2009/10, the difference in net debt and net debt including GFECRA started to widen.

If the GFECRA is included in the net debt calculation, South Africa’s net debt for 2024/25 would have amounted to 69.2% of GDP as opposed to 73.8%.

However, Botha noted that if the GFECRA is included in net debt calculations, there would be a strong argument that contingent liabilities need to be accounted for in the calculation as well.

If contingent liabilities and the GFECRA are included in the net loan debt calculation, it would amount to 84.9% of GDP in 2024/25, still pointing to a much worse position overall.