Africa’s most industrialized economy recorded a primary surplus—where revenue exceeds non-interest expenditure—of 31.6 billion rand ($1.7 billion) or 0.4% of gross domestic product for the year ending in March 2024, Bloomberg reported. This result aligns with the National Treasury’s forecast from February.
What the Central Bank said:
“The decline in non‐interest expenditure was driven by lower voted expenditure, largely owing to the sharp decline in payments for financial assets, reflecting government’s limited recapitalization of state-owned companies,”
According to data released in the South African Reserve Bank’s Quarterly Bulletin, Finance Minister Enoch Godongwana maintained a strict policy on funding debt-ridden state companies such as Transnet SOC Ltd., the ports and railways operator., providing relief only if they meet strict conditions including implementing recovery plans and selling non-core assets. In the February budget, Godongwana offered no new bailouts to state firms.
Additionally, the minister reduced the debt-relief funds for state power utility Eskom Holdings SOC Ltd. after it failed to meet the conditions attached to a 254 billion-rand package granted last year, which the company had been accessing in tranches.
The data will likely be well-received by investors who have previously avoided South African assets due to the country’s high debt levels. South Africa’s debt-to-GDP ratio stands at 74.1%, significantly higher than the emerging-market average of 58.9%, and its interest-to-GDP ratio is also notably high.
Currently, one-fifth of South African revenue is allocated to debt-service costs, which consume a larger portion of the budget than basic education, social protection, or health, according to the Treasury’s February budget.
To address this, the Treasury plans to draw down on the nation’s Gold and Foreign Exchange Contingency Reserve Account and introduce a new binding fiscal anchor, aiming to moderate government debt. The Treasury anticipates the debt will stabilize at 75.3% of GDP by 2025-26.
