South Africa is taking on more debt to fund critical infrastructure projects
Image: GCIS
South Africa is taking on more debt to fund critical infrastructure projects, while billions of rand continue to be spent every year servicing existing loans.
The latest borrowing, a $1.5 billion (about R24.7 billion) loan from the World Bank, is aimed at supporting reforms in key sectors, including electricity, freight transport and water, with the hope of unlocking economic growth and creating jobs.
However, the funding comes against the backdrop of rising debt costs, with the government spending more than R1 billion a day servicing its existing debt.
Finance Minister Enoch Godongwana previously conceded that rising debt-service costs were putting pressure on the fiscus.
"The National Treasury recognises the pressure that rising debt-service costs place on the fiscus and has implemented measures to ensure that debt-service costs do not continue to crowd out spending on core spending priorities," Godongwana said.
Despite these assurances, the reality is that the country's economy remains under strain, with sluggish growth, high unemployment and rising debt costs continuing to put pressure on government finances.
South Africa's gross government debt is expected to reach R6.3 trillion in the 2026/27 financial year, equivalent to 77.3% of GDP.
The South African Federation of Trade Unions (SAFTU) has already rejected the World Bank loan, arguing that further borrowing could increase pressure on public finances.
The union argued that the loan could deepen the country's reliance on debt and called on the government to publish the full agreement, including any conditions and policy commitments attached to the funding.
"SAFTU is particularly concerned that this loan is denominated in United States dollars. While the government currently estimates its value at approximately R25 billion, the actual cost to South African taxpayers will ultimately depend on the future performance of the rand against the US dollar," the union said.
"Should the rand depreciate, as it has repeatedly done over the past three decades, the cost of servicing and repaying this loan could increase substantially, imposing a far heavier burden than is currently being presented to the public."
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