Public Debt in South Africa

Abstract

After four decades of racial segregation, South Africa transitioned to a non-racial democracy in 1994. Inevitably for a country with segregationist labour market policies for so long, South Africa is also one of the most unequal countries in the world. In order to take an overview of government debt in South Africa, this chapter looks at macroeconomic performance but also at how the political regime characteristics and inequality have interplayed with government debt during the 1970–2016 period. The data suggest that economic growth correlates negatively with debt and that democracy correlates positively with debt. In addition, the data do not suggest that democratic maturity is already associated with lower debt nor that the outgoing apartheid-era National Party bequeathed the young democracy with high debt. Encouragingly, the data do suggest that inequality and public expenditure on education correlate positively with debt, which suggests that the democratic government has the median voter in mind when creating debt and also that part of the debt is being invested in human capital formation.