For all official information and updates regarding COVID-19, visit the South African Department of Health's website at www.sacoronavirus.co.za According to the World Fact Book, as at 31 December 2014, South Africa was running an estimated debt of $143billion. And it has now become Africa’s first pandemic-era sovereign default after failing to pay a $42.5 million Eurobond coupon. JOHANNESBURG - South Africa’s public debt, which is approaching rating agencies’ red line of 60% of economic output, is reaching uncomfortable levels, an IMF official said on Thursday. In these countries, the debt-to-GDP ratio has more than doubled in 2018 compared to its 2010 level as fiscal deficits widened after the end of the commodity price boom in 2014. In 2019, Zambia’s debt reached $11.2 billion, or 48 per cent of GDP, with the IMF predicting a rise to nearly 70 per cent of GDP by the end of 2020. That could give the Treasury the option of slowing the pace of domestic bond sales for the rest of the fiscal year, or continuing at the same rate to cover for a possible larger-than-expected revenue shortfall. Comments section policy: Any attacks on BusinessTech, its journalists, or other readers will result in a ban. “Treasury won’t be in a position to deliver.”. South Africa’s low level of debt in foreign currency is seen as a strength because it makes the country less vulnerable to rand weakness and could make it easier for the government to roll over maturing debt, according to Elina Ribakova, deputy chief economist at the Institute of International Finance. Government Debt to GDP in South Africa averaged 41.45 percent from 2000 until 2019, reaching an all time high of 62.20 percent in 2019 and a record low of 27.80 percent in 2008. That’s despite the government’s efforts to fund the package by reprioritizing spending and compares with the Treasury’s projection of 81.8%. However, finance minister Tito Mboweni’s medium-term budget will show on Wednesday that debt levels are much higher than in 1994, when the ruling African National Congress took over an almost bankrupt state. This reflects the difficulty of reining in the wage bill and reducing transfers to state-owned enterprises. 6 This translates to about R40 000 per person living in the country. Interest payments accounted for 9,2% (or R146 billion) of general government expenditure (R1,58 trillion) in 2016/17. South Africa’s debt is so outrageous that virtually all residents, both citizens and non-citizens are “guilty of the debt crime”: The government, private investors, down to the ordinary salary earners and consumers. South Africa Looks Toward Inclusive Recovery to Stabilize Debt, Boost Growth August 3, 2020 In a conversation with IMF Country Focus , the Director-General of South Africa’s National Treasury Dondo Mogajane explains how the government has responded to the COVID-19 crisis, how IMF financing will help to stabilize the economy, and strategies for addressing debt and spurring growth. As of 2018, the total farm debt was at record R168 billion. South Africa’s debt-service costs probably rose to 4% of GDP in 2019-20, the highest since 2003, and will climb even further. 7. We can see from the above that all the highlighted key economic indicators were moving in the right direction. Debt in the country’s economy economy is set to breach 80% of gross domestic product in 2021 as the government borrows … The next paragraph is an extract from the latest Qaurterly Bulletin from the South African Reserve Bank. The details and depth of South Africa’s debt cannot be exhausted here. Two main trends have emerged regarding consumer debt levels in South Africa, according to the latest DebtBusters’ debt index for the second quarter of 2020 released on Monday. Given the limited options available to implement the envisioned consolidation plan, this time is likely to be no different.”, Read: South Africa’s biggest bank warns over rising retrenchment claims. Debt may rise by 40 percentage points over next 3 fiscal years, Economy forecast to contract by 6.5% in 2020 on virus impact. About 60% of the debt is with the commercial banks, 29% is with the Land Bank, with the rest spread between agricultural cooperatives, private persons and other institutions. The negative outlook on the assessment means that “a rating upgrade is unlikely in the near future,” said the ratings company in Thursday’s report. South Africa’s gross loan debt stood at R2,2 trillion in 2016/17, according to the National Treasury. “South Africa’s debt situation is worse than its emerging market peers. The notable uptick to the estimate of R160 billion is partially attributed to 2015-16 … That is how the country’s debt initially escalated. South Africa lost its last investment grade assessment on March 27, when Moody’s downgraded its foreign- and local-currency debt to Ba1. In May, ratings agency Finch said failure by South Africa to lower public debt risks will trigger credit downgrades deeper into sub-investment. This is what Finance Minister Tito Mboweni announced to Parliament on Government’s gross loan debts reached an … The national debt is forecast to reach R3.56 trillion, or 65.6 percent as a share of gross domestic product (GDP) by the end of 2020/21, peaking at 93 percent of GDP in 2023/24. Before it's here, it's on the Bloomberg Terminal. Lower electricity demand will reduce cash flows and add to the funding needs of Eskom Holdings SOC Ltd., Moody’s said. South African government debt could rise by 40 percentage points over the next three years as strong, widespread fiscal pressures and persistently low economic growth weigh on the nation’s credit profile, according to Moody’s Investors Service. In this guide to South Africa’s National Debt, we discuss the amount of the debt, how it’s calculated, who controls it, who holds the debt, how the government raises funds, and the political issues surrounding its debt. South Africa is faces surging debt as the havoc wrought by the coronavirus pandemic compounds a deterioration in public finances caused by overspending, mismanagement and alleged graft during former president Jacob Zuma’s nine-year rule. They have yet to recover from this, their external debt has increased to $136.6 billion while the number of people in the housing backlog has increased to 2.1 million from 1994's 1.5 million. South Africa wants to stabilize its public debt level at 88.6% by 2025/2026. In 2014, new bond issues from Zambia, Kenya, Côte d’Ivoire, South Africa, Senegal and Ghana had raised almost US$7bn by the end of the third quarter, bringing the cumulative total since 2006 to US$25.8bn. The strong take-up in domestic long-term loans is largely due to the Treasury doubling the limit on non-competitive auctions to 100%, he said. Africa’s eurobond debt passed the $100-billion milestone after Ghana issued $2.7 billion on ... More are expected from South Africa, Kenya, Angola, Egypt ... Debt levels aren’t the problem. Moody’s Warns of South Africa’s Debt Rising Above 100%. South Africa recorded a government debt equivalent to 62.20 percent of the country's Gross Domestic Product in 2019. Total net debt will only stabilise at 57.3% in 2024/25. 54,500,000. , July 10, 2020, 4:52 AM PDT. There is also a risk of “further fiscal drains” from state-owned companies as the virus constrains activity. The downgrades raised borrowing costs and complicated efforts to narrow the budget gap. Africa’s most industrialized-economy will shrink by 6.5% this year due to the virus and strict lockdown measures that halted almost all economic activity for five weeks from March 27, Moody’s said. Sign up to our Next Africa newsletter and follow Bloomberg Africa on Twitter. Households Debt in South Africa increased to 72.80 percent of gross income in 2019 from 71.90 percent in 2018. The country's strained finances and high debt levels will likely come in to sharp focus as the president addresses the nation this evening. government debt levels in many countries. Prinesha Naidoo. That compares with its previous forecast for a 2.5% contraction and the government’s projection of a 7.2% drop in output. Debt may rise by 40 percentage points over next 3 fiscal years. "Household debt increased at a faster pace in the fourth quarter of 2018. For example, South Africa has been paying off $22 billion which was lent to stimulate the apartheid regime. However, I’ll try to point out the most significant facts below: See: 20 Richest African Countries 2015: See How Th… A pedestrian walks by a restaurant unit available to let in Johannesburg on June 11. It lost its last investment-grade assessment at Moody’s Investors Service in March, more than 25 years after it was first awarded. South Africa’s debt-to-GDP ratio remains sustainable, despite having risen from 23% of gross domestic product in 2007/8 to 39.3% of GDP in 2013/14, Finance Minister Pravin Gordhan told … While the rand is near its best level since March and bond yields have recovered from a blowout when a virus lockdown started, the generic 10-year yield remains above 9%, suggesting a risk premium is still priced in on the country’s debt. Households Debt To Income in South Africa averaged 58.16 percent from 1969 until 2019, reaching an all time high of 86.40 percent in 2008 and a record low of 40.30 percent in 1980. And this is currently where South African consumers, and in fact the South African government finds itself in. Net loan debt will reach R3.5 trillion or 55.5% of GDP by 2021. Except for Angola and the Republic of Congo, the level of debt in oil exporting countries remains below the average level of other SSA countries. Yields on the country’s generic, rand-denominated 10-year debt have climbed since 2012, when South Africa began its march toward a full house of junk credit ratings. Also, debt levels were reasonably below 30% of GDP, and lastly, unemployment levels were also below 25%. By. If you look at the fiscal data of the IMF published last month, it shows that the average emerging market … “The National Treasury has been making bold promises to restore the public finances since 2017, only to kick the can down the road later. Hackers Breach Thousands of Security Cameras, Exposing Tesla, Jails, Hospitals, New Biotechnology Covid Treatment Reduces Risk of Death, Covid Outbreak Hits Banks, Gyms, Schools in Hong Kong, Trader Buys $36 Million of Copper and Gets Painted Rocks Instead, Johnson & Johnson’s Single-Shot Covid Vaccine Approved by EU. The Treasury may introduce a debt limit in the budget, a suggestion proposed by the IMF almost two years ago. Eskom and SAA were also profitable. The virus forced the ruling party to break its long-held resistance to borrowing from the International Monetary Fund, securing a $4.3 billion dollar emergency loan to bankroll part of a stimulus package announced by president Cyril Ramaphosa. Increased spending driven by a 500 billion-rand ($29.6 billion) stimulus package to shore up the economy against the impact of the coronavirus pandemic will widen the budget deficit to 15.6% of GDP and take debt up to 89.9% this fiscal year, Moody’s analysts led by Paris-based Lucie Villa said in a credit opinion published Thursday. The cost of servicing loans has been the fastest-growing expenditure item since 2011 and is crowding out money for development, including education and health. These charts that show how South Africa hasn’t managed to contain liabilities since the shock of the global financial crisis: Even before the virus, increased spending to grow the government workforce and bail out state-owned companies such as Eskom Holdings SOC Ltd. conspired with below-target revenue and slow economic growth to boost debt. Canada’s national debt currently … 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. That would push government debt as a percentage of gross domestic product well over 100% and much higher than the 87.4% peak the Treasury projects for 2023-24 under its active management scenario. Talks with the World Bank may have an impasse after the government rejected initial conditions attached to the funds it seeks to borrow. 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Concerns about an impending debt crisis in Africa are rising alongside the region’s growing debt levels. Canada’s national debt is currently at 83.81% of its GDP. As a percentage of gross domestic product, it will peak in 2024 in the Treasury’s best-case scenario. “South Africa’s debt situation is worse than its emerging market peers. That’s provided the government takes active steps to stabilize the trajectory and revive the economy. South Africa has historically recorded high debt levels with the general government gross debt as a percentage of gross domestic product (GDP) reaching levels above 140 percent in 1900 and just below 120 percent during World War II, according to the Carmen Reinhart and Kenneth Rogoff database. “South Africa’s debt position is going to be unsustainable over the next five years because the fiscal consolidation measures are unfeasible,” said Mpho Molopyane, an economist at FirstRand Group Ltd’s Rand Merchant Bank. Yields on some African issues are similar to those of southern European states, seemingly indicating a low risk of default. After cutting borrowing during years of strong economic growth from the late 1990s, the government posted its first post-apartheid budget surplus in 2007. First, South Africa actually adopted a ‘countercyclical’ approach after 2008: government spending increased faster than revenue. South Africa’s farming sector is heavily in debt. Between 1980 and 2016, South Africa’s farm debt has been rising at an average rate of 2 percent per annum, reaching R144 billion in real terms in 2016 – a record level in a dataset. It could make the path toward a debt crisis similar to that of Argentina or Greece slower and longer. Servicing this level of debt can be expensive. South Africa’s debt-service costs probably rose to 4% of GDP in 2019-20, the highest since 2003, and will climb even further. At the time our SOEs were equally crucial contributors to our national finances, e.g. Illana Melzer, Director of Strategic Research at Eighty20, was invited to speak about Student Debt in South Africa at the All Africa Credit Congress held in Johannesburg on 16 – 17 May 2016. Have a confidential tip for our reporters? South Africa could exceed its domestic-funding requirements for the year after issuing debt at an “alarming pace” to fund the budget deficit, said Mike van der Westhuizen, a portfolio manager at Citadel Investment Services.
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