SA could achieve significant development gains if its debt-servicing costs were cut to sustainable levels, according to new report by the African Centre for Economic Transformation (ACET).
The study, which models the effects of capping debt repayments at 5%, 10% and 14% of government revenue, argues that reducing debt-servicing costs offers African countries a critical opportunity to address development gaps and accelerate progress toward Sustainable Development Goals.
ACET is a pan-African economic policy institute supporting Africa’s long-term growth through transformation.
“Overall, the 5% scenario delivers the greatest developmental gains, while the 10% scenario balances fiscal realism with significant outcomes. Even the 14% scenario achieves meaningful improvements, particularly in maternal survival and access to basic services,” ACET said.
Under the most ambitious 5% scenario, SA would generate fiscal space sufficient to expand access to clean water for 34,372 additional people, provide basic sanitation to 390,919 and add 31,546 children to school enrolment, the report shows. The model further estimates that lower debt costs could save the lives of 1,006 children under five years and 17 mothers through improved public health spending.
Current debt levels squeeze budgets
SA spends roughly R386bn a year servicing its R5.7-trillion debt, equivalent to 5.2% of GDP in the 2024/25 fiscal year, more than one-fifth of government revenue, deepening concerns that rising debt costs are squeezing funds for essential public services.
As SA prepares to host the G20 heads of state meeting next month, Africa has a crucial opportunity to call for a fairer global debt system that truly serves its people.
The budget tabled in parliament shows that government debt is projected to stabilise at 77.4% of GDP in 2025/26.
The IMF, which has urged SA to adopt a fiscal rule anchored in a 60% debt ceiling, has also expressed scepticism about the government’s ability to stabilise the debt ratio, which it sees rising more than 80%.
The report argues such levels “leave little fiscal space for investments in key sectors such as health, education, water and sanitation.” By contrast, the GRADE model (framework used by authors that links reduced debt service costs to measurable social and developmental outcomes) simulations demonstrate even a limited reduction in debt costs could redirect resources toward basic service delivery.
Moderate debt relief still helps
The 10% scenario which is considered the most fiscally realistic still suggests measurable progress. Across Africa, countries operating under this framework achieved large welfare gains. In SA's case, proportional improvements in sanitation and education would continue.
“Our analysis shows that with bold debt reform, we can unlock the resources needed to invest in people and drive real transformation. As SA prepares to host the G20 heads of state meeting next month, Africa has a crucial opportunity to call for a fairer global debt system that truly serves its people.”
The research was released this week following a call by 165 civil society groups to SA president Cyril Ramaphosa to use the country’s G20 presidency to push for urgent reforms on global debt before the presidency is handed over to the US on December 1.
Calls for global debt reform
Their letter urged sweeping actions, including “the cancellation of all unsustainable and illegitimate debts, from all creditors”, and called for structural reforms such as launching an African credit ratings agency and forming a borrowers club.
“Despite some progress under the G20’s Common Framework, current debt arrangements remain inadequate,¨ the groups wrote in the letter. “Restructuring processes are too slow, debt reductions too shallow and the sharing of responsibility between public and private creditors deeply unequal.
“While this year’s G20 has been put forward as an ‘African G20’, there is no evidence that any progress has been made on the debt crisis facing Africa and many other countries worldwide during the SA presidency,” the groups said.
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