Source: JP Morgan
  • JP Morgan has released a graph depicting relative debt levels around the world.
  • South Africa is sitting in a comfortable position compared to other countries.
  • But the graph doesn't tell the whole truth, says dr Adrian Saville, CEO of Cannon Asset Managers.


The news about the state of the South African economy has been singularly depressing in recent days. First there was the news that the economy shrank by more than 2% in the first quarter, which was partly responsible for a rand meltdown. The currency has crashed through R13 for a dollar; this morning it is trading at R13.11. Then April’s manufacturing data showed a slowdown from March.

A new graph compiled by JP Morgan has provided a small silver lining amid the gloom. It shows South Africa occupying a relatively comfortable position when it comes to global debt levels.

The graph plots the combined government, corporate and household debt burdens (measured as a percentage of GDP) of various countries against the debt growth rate over the past decade.

Countries like France, Singapore, Canada, Japan and China have seen large increases on both counts. South Africa, by contrast, looks to be in good shape relative to developed markets and emerging market counterparts.

After the depressing GDP numbers, the graph makes South Africa looks a bit sexier, says dr Adrian Saville, CEO of Cannon Asset Managers.

South Africa’s overall indebtedness is looking healthy, which means it is in a better place to weather any potential crises, says Saville.

But scratching beneath the surface, the picture becomes murkier.

The relatively positive position of Argentina should indicate that the graph can’t be judged on face value, says Saville.

Firstly, the graph does not depict the cost of servicing debt, which is much lower for richer countries with low interest rates, and who also pay debt in their own currency.

By contrast, South Africa has to pay much higher interest rates because of its weaker credit rating.

Also, the graph shows government, corporate and household debt bundled together. In South Africa, government debt has soared, while the latter categories have declined. Unfortunately, our government debt was not used for infrastructure, which could bolster economic growth in the long term, but for expenditure, adds Saville.

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