South Africa’s mounting budget deficit is narrowing the country’s options for expanding social spending, as a rising share of government resources is being absorbed by debt repayments. In 2024, the national budget deficit stood at 6.1% of GDP, one of the deepest gaps since the end of apartheid. As a result, the government is increasingly forced to borrow to meet its obligations, with the cost of servicing that debt expected to consume over 20% of the main budget this year.

The shift in fiscal structure is stark. A decade ago, interest payments made up roughly 10% of total government spending; today, they are one of the fastest-growing items in the budget. This means that each year, a larger slice of the national pie is set aside just to pay interest, not to invest in health, education, or social protection.

South Africa’s current social grant system already supports over 30 million people, roughly double the number in employment, but the country’s ability to increase welfare benefits or extend new forms of support is tightly constrained by the tightening fiscal outlook. Treasury projections show that without higher economic growth, any further increase in social spending would require either deeper borrowing or substantial tax hikes, both of which would damage growth prospects.

The drag from debt is set against a background of slow economic growth. GDP growth has averaged less than 1% a year over the past decade, far below what is needed to expand the tax base or lift employment.

Economics and Policy Editor at The Common Sense, Bheki Mahlobo said, “unless tough choices are made, either to curb spending, raise revenue, or unlock growth, the cost of inaction will be to steadily erode government’s ability to support vulnerable households and deliver on basic services”.