Treasury says debt has peaked. Now the test is delivery

In an interview with the Mail & Guardian, Finance Minister Enoch Godongwana explains why stabilising South Africa’s debt marks a turning point for the fiscus and why rail reform, infrastructure delivery and fiscal discipline will determine whether the shift can be sustained. Finance minister Enoch Godongwana says South Africa’s debt trajectory has reached a turning point, but whether that shift holds will depend on faster infrastructure delivery, rail reform and continued fiscal discipline. In a one-on-one interview with the Mail & Guardian after Standard Bank’s annual Budget Forum in Johannesburg on Tuesday, Godongwana said stabilising the country’s debt marks an important milestone for the fiscus, but warned that sustaining it will depend on growth and execution rather than fiscal policy alone.

For Godongwana, the significance of stabilising the debt ratio is not simply a technical fiscal milestone. It determines how much of the national budget can be directed toward services and investment rather than interest payments. “What does high debt mean for South Africans?” he said, pausing briefly before explaining.

“High debt means government is taking more money from taxes — which taxpayers pay — to service the debt. The effect of that is it crowds out the spending government should have done to pay for schools, education, health and so on.” “So when debt peaks,” he continued, “it means we have reached a point where we have contained it. Moving forward, debt is going to go down, and there will be more money available to pay for basic services for our people.” Treasury’s projection that the debt ratio stabilises this fiscal year marks a shift from more than a decade of steady deterioration.

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Borrowing rose sharply after the global financial crisis and accelerated again during the Covid pandemic, pushing debt service costs to one of the fastest growing components of public spending. But earlier at the forum, Godongwana cautioned against interpreting the moment as a fiscal victory. “Our target was the year in which we were to reach the peak, not the number,” he said.

The point, he argued, is direction rather than precision. Whether the ratio peaks slightly higher or lower matters less than whether the country can sustain a downward trajectory over time. When asked which reform could lift economic growth most quickly, Godongwana did not reach for a sweeping programme of structural change. Instead, he pointed to a specific constraint.

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