There’s an article on Moneyweb this morning, discussing South Africa’s National Debt. There are two great graphs that have now found their way into my Twitter and Facebook feeds.

South Africa’s National Debt: In Graphs

The first involves Debt-to-GDP ratios:

south africa national debt

The second involves Debt Service Costs as a percentage of tax revenues:south africa debt costs

I have a few more graphs to add.

Government Consolidated Spending, over time

This data was surprisingly hard to track down – I spent some time going through national budget archives before I could find what I was looking for. But here it is:

consolidated government spending South Africa over time
*the red section is the current forecast

Now on its own, that’s not especially helpful. Yes, it has gone up – but there is also inflation each year, so you’d expect the numbers to go up (even if they’d remained ‘constant’).

The bigger test is how government spending relates to GDP over time:

government spending to gdp over time

And if we compare the annual growth in GDP to the annual growth in government spending, we get this sad picture:

government spending growth vs gdp growth over time south africa

The key point: government spending growth is outstripping the economy’s growth

To illustrate this, let’s assume that we’re matching R1 of GDP against R1 of government spending, beginning in 1995. Based on those annual growth rates, you get this:

government spending vs gdp compared
*the red and purple are forecasted estimates

Here is the problem: when there is a bad year, and the government overspends, this ‘re-bases’ the budget planning.

An analogy:

  • Let’s say that you plan to spend R10,000 this year on travel, but you end up spending R12,000 because a family member passed away unexpectedly, and you had to go to their funeral.
  • When you come to your budget planning for next year, you plan to adjust your travel budget upwards by inflation (6%).
  • Should you take what you actually spent in 2017 (R12,000), and make your 2018 budget R12,720? Or do you go back to your R10,000, and increase it to R10,600?

If you’re a government, you apparently work off what you actually spent (ie. option 1). And this means that the unexpected expenditures of the past become the expected expenditure of the future – and this then compounds over time.

Also, a trick question

Government spending is meant to be stimulative.

Well, there’s a lot of extra spending (almost 50% more than where SA was spending in the mid-2000s).

So where is the growth?

Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow me on Twitter @RollingAlpha, and on Facebook at Also, check out the RA podcast on iTunes: The Story of Money.