The country’s improved debt-to-GDP ratio may offer government a stronger fiscal narrative, but economists warn that unless it translates into faster economic growth, more jobs and higher private investment, the country will remain trapped in a cycle of weak expansion and rising social pressures.
The country’s debt burden has been mechanically reduced by almost four percentage points following Statistics South Africa’s GDP rebasing exercise, with the National Treasury revising the debt-to-GDP peak from 78.4% to 74.6% in 2025/2026.
Read more: Treasury says SA’s debt-to-GDP ratio is down by four percentage points
The revision stems from Stats SA’s decision to rebase and benchmark the economy, increasing the estimated size of South Africa’s nominal GDP by about R393-billion or 5.1%.
But according to Unisa School of Business Leadership economist Prof Simphiwe Madikizela, the improvement is largely statistical and should not be mistaken for a turnaround in the country’s underlying economic fortunes.
“Essentially, South Africa’s economy is now measured as being larger than previously estimated. Since the debt-to-GDP ratio measures government debt relative to the size of the economy, a larger GDP denominator automatically produces a lower debt ratio, even when the actual amount of government debt remains unchanged,” said Madikizela.
He likened it to a household whose income is revised upward while its debt remains the same. The debt burden appears lighter on paper, but the outstanding liabilities do not disappear.
Growth remains the missing ingredient
While the revised figures improve South Africa’s fiscal metrics, economists argue that lower debt ratios alone will not generate economic growth.
Madikizela said the real question is whether the improved fiscal outlook creates conditions that encourage investment, infrastructure development and economic expansion.
Read more: GDP drops 0.2% in second quarter of 2026
“The real measure of success will not simply be whether we can bring the debt-to-GDP ratio below 70%, but whether we can grow the economy sufficiently to create jobs, increase household incomes, expand the tax base and improve the quality of life,” he said.
The revised projections show the debt ratio falling below 70% by 2032/2033, a year earlier than previously forecast. Treasury has also revised the main budget deficit for 2026/2027 from 3.7% to 3.5% of GDP while maintaining a projected primary surplus of 1.6%.
However, Madikizela stressed that sustainable fiscal improvement requires more than statistical revisions.
“The latter requires government to manage expenditure responsibly, improve revenue collection, reduce wasteful expenditure and ensure that public resources generate economic and social returns,” he said.
Opportunity or missed chance?
Independent economist Duma Gqubule argued that South Africa’s fixation on debt stabilisation has come at the expense of growth and employment.
“It doesn’t make sense to stabilise the debt ratio without economic growth,” Gqubule said.
“The finance minister has been in office for five years and he still hasn’t told us how he plans to grow the economy.”
Read more: SA economy rises by 0.5% in GDP in the third quarter
Gqubule accused the Treasury of pursuing austerity policies that suppress economic activity, arguing that spending cuts ultimately weaken growth and reduce the government’s ability to generate revenue.
“We have been having these austerity measures since 2012 and the debt has more than doubled as a percentage of GDP. Austerity is counterproductive, as it reduces GDP growth because you are taking money out of the economy,” he said.
Despite the improved debt ratio, Gqubule believes Treasury is more likely to continue prioritising debt reduction than economic stimulus.
“An ordinary person would say the lower debt gives us space to stimulate the economy, but Treasury will probably use it to channel the money towards paying off debt.”
Investors watching growth prospects
Madikizela acknowledged that the lower debt ratio could improve investor perceptions of South Africa’s fiscal sustainability and strengthen the government’s standing with ratings agencies and lenders.
But he cautioned that investors focus on far more than a single debt metric.
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“Investors will still consider the actual debt stock, interest payments, economic growth, inflation, exchange-rate stability, government revenue performance and the country’s ability to implement structural reforms,” he said.
The country’s debt-servicing costs are still projected to average 5.1% of GDP over the medium term, underscoring the fact that government’s interest obligations remain unchanged despite the statistical improvement.
Jobs and infrastructure will be the real test
For households, the GDP rebasing exercise will bring little immediate relief.
“The GDP rebasing exercise does not automatically mean that household incomes have increased, unemployment has declined or the cost of living has become more affordable,” Madikizela said.
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Instead, he argued that any fiscal credibility gained from the revised figures should be leveraged to unlock productive investment in electricity, water, roads, rail and logistics, sectors widely viewed as constraints on economic growth and job creation.
The economists say the debate should not focus on whether debt ratios look better, but whether government can use the breathing room to unlock faster growth.
The 2027 Budget is likely to provide the first major indication of whether Treasury intends to use the revised fiscal position to accelerate investment and growth or remain focused on fiscal consolidation.
- The country’s improved debt-to-GDP ratio may offer government a stronger fiscal narrative, but economists warn that unless it translates into faster economic growth, more jobs and higher private investment, the country will remain trapped in a cycle of weak expansion and rising social pressures.
- The country’s debt burden has been mechanically reduced by almost four percentage points following Statistics South Africa’s GDP rebasing exercise, with the National Treasury revising the debt-to-GDP peak from 78.4% to 74.6% in 2025/2026.
- Read more: Treasury says SA’s debt-to-GDP ratio is down by four percentage points The revision stems from Stats SA’s decision to rebase and benchmark the economy, increasing the estimated size of South Africa’s nominal GDP by about R393-billion or 5.1%.
- But according to Unisa School of Business Leadership economist Prof Simphiwe Madikizela, the improvement is largely statistical and should not be mistaken for a turnaround in the country’s underlying economic fortunes.
- “Essentially, South Africa’s economy is now measured as being larger than previously estimated.
