SA’s debt burdens the poor most

2026-03-26 - 07:20

Think about a nurse at Baragwanath Hospital in Soweto. She starts her shift before dawn, tends a ward that is too full and earns a salary that has not kept pace with the cost of living. The medicines sometimes run short. The equipment is ageing. Now consider that on the very same day that she clocks in, the South African government will spend approximately R1.18 billion – not building clinics, not training doctors, not buying medicine – simply servicing interest on its debt. That is what happens every day of the year. The 2026-27 budget makes this plain. SA will spend R432.4 billion on debt service costs this financial year – R122 billion more than the R310.4 billion it allocates to public health for 84% of the population. It exceeds what government spends on community development (R294.3 billion), economic development (R283.9 billion) and peace and security (R274.6 billion), each individually. It is the second-largest spending line in the entire consolidated budget. The instinct is to read this as a story about debt being too high. That framing is wrong – or radically incomplete. Higher debt is not inherently bad. Debt, wisely used, is how governments build the infrastructure, education systems and public health capacity that lift people out of poverty. SA has the right and the obligation to borrow in service of its people. The crisis is not the borrowing, it’s what it costs. SA’s gross debt-to-GDP ratio sits at 77% – unremarkable by global standards. Japan carries debt exceeding 230% of GDP. The United States is above 121%. The UK, France and Canada all carry debt above 100% of GDP. The International Monetary Fund has confirmed all four are in this category. None of them are in crisis. They are economies whose sovereign debt is priced by global financial markets as essentially risk-free – which is precisely the point. The problem is not the volume of SA’s debt. It is the punishing rate at which that debt is priced – and the people who pay that price are not the bondholders. According to the UN Conference on Trade and Development (UNCTAD), developing countries have been borrowing at rates two to four times higher than those available to the US since 2020. Across Africa, the continental average cost of financing sits at 11.6% – some 8.5 percentage points above the US benchmark. South Africa, despite being one of the continent’s more sophisticated debt issuers, is not immune. A decade of credit rating downgrades – driven in large part by state capture and the near-collapse of Eskom – has locked it into high-cost borrowing that compounds, year after year, into fiscal suffocation. Consider what this means in practice. A country carrying 77% debt-to-GDP while borrowing at 3% operates in a fundamentally different fiscal universe to one borrowing at 10%. The former invests. The latter chooses. And SA’s choice – enforced by the terms on which it can access capital – has consistently fallen against the people who need the state most. Not those with medical aid. Not those with private schooling. The ones waiting in line at Chris Hani Baragwanath. The children in Limpopo classrooms where the textbooks never arrived. The Wits School of Governance’s William Gumede has captured this through the lens of Stanlib chief economist Kevin Lings: China’s debt-to-GDP moved from 28% in 2009 to 80% today – a trajectory similar to SA’s. But China built high-speed rail, hospitals and export capacity that will generate returns for decades. SA took on its debt through Eskom bailouts, the looting of state-owned enterprises and the pillaging of public procurement. The problem was never the borrowing. It was that the borrowing produced nothing for ordinary people – and they are now being made to repay it anyway. UNCTAD’s 2025 World of Debt report places SA inside a global trap. Global public debt hit a record $102 trillion in 2024. Some 3.4 billion people now live in countries spending more on debt interest than on health or education. In Africa, between 2019 and 2021, 25 countries – nearly half the continent – spent more on interest payments than on health. Africa’s interest payments grew by 132% over the past decade, more than double the rate of GDP growth. This is the structural consequence of a global financial architecture that prices risk onto the global south and extracts the returns northward. SA’s constitution is explicit: the state must take reasonable measures to progressively realise the right to health, education, housing and social security. Spending R432.4 billion to service debt while 26.5 million South Africans depend on social grants and public health facilities run short of essential medicines is not a neutral fiscal outcome. It is a political choice – and it represents a failure of the state’s most fundamental obligation. The austerity is not shared. It is targeted... and it lands hardest on the poorest. The solution is to fight collectively with African peers for the reform of the international financial architecture: concessional finance at scale, debt restructuring mechanisms that include private creditors, and special drawing rights allocations weighted towards vulnerability rather than GDP. It is to insist the cost of capital available to SA reflects its developmental needs, not only its credit rating. And to be honest with South Africans about what fiscal consolidation actually means when the belt is always tightened around the same starving waists.