Big shock coming for South Africa
Efficient Group chief economist Dawie Roodt warned that South Africa is heading for a financial disaster, which will send the economy into a tailspin.
Roodt told Biznews that South Africa is headed for a recession, and all the bad things that come with it, unless it addresses its fiscal deficit and rising debt.
Currently, the government runs a full budget deficit of around 5% of gross domestic product (GDP), amounting to R374.7 billion.
South Africa has run deficits for sixteen years, funded through debt. The debt-to-GDP ratio increased from 26% in 2009 to around 76% in 2025.
However, this only tells part of the story. Roodt revealed that South Africa’s real debt-to-GDP ratio is closer to 95% when factoring in state-owned enterprises and local authorities.
Due to the rising debt burden, South Africa will spend R424.9 billion on debt-service costs this year.
Over the medium-term budget framework, debt servicing costs will consume 22 cents of every rand of tax collected.
Roodt warned that the country will face a financial disaster unless the government addresses this unsustainable debt burden.
“One day, we will see the South African bond market collapse. The bond market keeps everybody on the straight and narrow,” he said.
He warned that when the bond market experiences turmoil, yields will rise to between 15% and 25%, sending shockwaves through the local financial market.
The rand will significantly weaken, negatively affecting the financial market. South African banks will be the hardest hit.
“Insurance prices will fall. Equity prices will fall. All South Africans will suddenly become much poorer,” Roodt explained.
The South African Reserve Bank (SARB) will be forced to increase interest rates as inflation will increase due to higher petrol prices.
“The economy will go into a tailspin. There will be much weaker economic growth, a deep recession, and all the negative effects that go with it,” he said.
“That is what we are heading towards if we do not turn South Africa’s dismal fiscal situation around.”
How to stop South Africa from a financial disaster
Roodt said the only way to address the dismal financial situation is to ensure that the South African economy grows faster.
“We must put policies in place to ensure better economic growth. This will need an ideological change,” he said.
Another critical intervention is to rein in state spending. Unless the government cuts spending, it will continue to run significant deficits.
Roodt pointed to Javier Milei’s example in Argentina as a way for the government to quickly cut state expenditures without sacrificing economic growth.
“Milei, Argentina’s president, is cutting back on state expenditure and has strong political support because the public understands the financial difficulty the country is in,” Roodt said.
“What is important in South Africa is to inform the public that the state is in very deep trouble financially and that we are heading for even more trouble if no changes are made.”
Roodt explained that the sooner the changes are made, the less painful they will be for the country and individuals.
“The day is going to come, especially if there is a political force behind it like Donald Trump, that will make change happen rapidly and then financial markets will really punish us.”
“People must know this: if we continue on this trajectory, we are heading for a financial crisis that will have severe consequences for South Africa.”
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