The central bank said yesterday in its latest Financial Stability Review that lower-than-expected revenue collection and high levels of government debt could negatively impact on international investors’ view of South Africa’s creditworthiness.
It said government debt had increased to R2.79 trillion by the end of March – R300bn higher than the corresponding last year.
“This increase was mainly driven by domestic debt, which accounted for around 90 percent of gross loan debt,” Sarb said.
“National Treasury expects government debt to stabilise at 60.2 percent of gross domestic product (GDP) by 2023/24, while the International Monetary Fund projects a debt-to-GDP ratio of 65.1 percent by 2023.”
In April the SA Revenue Service (Sars) said it had collected R14.6bn short of its target of R1.3trn during the 2019 tax year.
New commissioner Edward Kieswetter, who took over last month after the disastrous five years of Tom Moyane, has said that restoring the revenue collection capacity of the tax services is at the top of his list.
Ettiene Retief of the SA Institute of Professional Accountants said Kieswetter had a strong pedigree when it came to running organisations
“He’ll need to provide strong leadership, assure them of their value and motivate them to value service excellence.
"Second, he’ll have to focus on rebuilding Sars systems and capacity. He has a long road ahead of him, but he's the right man for the job,” Retief said.
Sars said the state of the government's finances and the sustainability of government debt, in particular, remained a risk to the stability of the domestic financial system and was one of the main potential determinants of further sovereign credit rating downgrades.
This month rating agency Moody’s issued its strongest warning yet that the country was fast slipping into junk status as continuing structural weaknesses and rising debt overran the country’s ability to service its obligations.
The rating agency, which is the only one of the major rating agencies that still has the country's sovereign debt above junk, further warned that without a strong policy response to spending, a weakened tax base and nominal growth for South Africa's debt levels, the country's sovereign debt could be downgraded to sub-investment. Other major rating agencies, Fitch Rating and S&P Global, downgraded South Africa’s credit rating to sub-investment grade in 2017.
The Sarb said that should a sovereign downgrade by Moody’s occur, it could prompt forced outflows of about $1.5bn or 0.5 percent of GDP.