Measures to improve fiscal sustainability and debt management at the provincial level: a case of South Africa

Journal of Social Sciences Vol. VIII, no. 3 (2025), pp. 19 - 33 Fascicle Social Science ISSN 2587-3490 Topic Economics Policy and Economic Policies eISSN 2587-3504 Journal of Social Sciences September 2025, Vol. 8 https://doi.org/10.52326/jss.utm.2025.8(3).02 CZU 336.2:005.915(680) MEASURES TO IMPROVE FISCAL SUSTAINABILITY AND DEBT MANAGEMENT AT THE PROVINCIAL LEVEL: A CASE OF SOUTH AFRICA Beauty Zindi*, ORCID: 0000-0003-4790-5379, Malefetsane Mofolo, ORCID 0000-0001-6764-0991 University of Walter Sisulu Faculty of Management and Public Administration Sciences. Private Box X3182, Butterworth, Eastern Cape, South Africa * Corresponding author: Beauty Zindi, [email protected] Received: 06. 27. 2025 Accepted: 08. 30. 2025 Abstract. Public debt and fiscal sustainability are pressing issues for provincial governments in South Africa, posing significant challenges to effective governance and service delivery. Using desktop research, the article explores the impact of inefficient financial management, corruption, and governance weaknesses which exacerbate fiscal pressures and hinder sustainable development. The results showed that a plethora of factors contributed to rising public debt and fiscal instability in provinces, including limited revenue-generation capabilities, heavy reliance on national transfers, escalating costs of service delivery, and unfunded mandates. The article recommends that South African provincial governments can modernise revenue collection systems, adopt cost-saving technologies, revise the equitable share formula, and strengthen financial accountability and transparency. The study underscores the importance of innovative and collaborative approaches to ensure long-term economic stability and equitable development across South Africa’s provinces. By implementing these strategies, provincial governments can reduce their debt burdens, improve fiscal sustainability, and enhance their capacity to deliver essential services. Keywords: public debt; debt management, fiscal sustainability, provincial governments; financial management. Rezumat. Datoria publică și sustenabilitatea fiscală sunt probleme presante pentru guvernele provinciale din Africa de Sud, care prezintă provocări semnificative pentru o guvernare eficientă și furnizarea de servicii. Folosind cercetări documentare, articolul explorează impactul managementului financiar ineficient, al corupției și al deficiențelor de guvernanță, care exacerbează presiunile fiscale și împiedică dezvoltarea durabilă. Rezultatele au arătat că o multitudine de factori au contribuit la creșterea datoriei publice și a instabilității fiscale în provincii, inclusiv capacitățile limitate de generare a veniturilor, dependența mare de transferurile naționale, creșterea costurilor de furnizare a serviciilor și mandatele nefinanțate. Articolul recomandă ca guvernele provinciale sud-africane să modernizeze sistemele de colectare a veniturilor, să adopte tehnologii de economisire a costurilor, să revizuiască formula de partajare echitabilă și să consolideze responsabilitatea și transparența financiară. 20 B. Zindi, M. Mofolo Journal of Social Sciences September, 2025, Vol. 8 Studiul subliniază importanța abordărilor inovatoare și colaborative pentru a asigura stabilitatea economică pe termen lung și dezvoltarea echitabilă în provinciile Africii de Sud. Prin implementarea acestor strategii, guvernele provinciale își pot reduce povara datoriilor, pot îmbunătăți sustenabilitatea fiscală și își pot spori capacitatea de a furniza servicii esențiale. Cuvinte cheie: datorie publică; gestionarea datoriei, sustenabilitate fiscală, guverne provinciale; management financiar. 1. Introduction Public debt has become a central issue in discussions about fiscal sustainability, particularly in developing economies. In South Africa, provincial governments face increasing pressure to deliver essential public services while managing their finances responsibly [1]. Rising public debt levels, exacerbated by structural economic challenges and the lingering impacts of global crises, pose significant threats to fiscal sustainability. For provincial governments, balancing the competing demands of addressing social inequalities, fostering economic growth, and maintaining fiscal discipline is an enduring challenge [2]. South Africa’s fiscal framework delegates substantial responsibilities to provincial governments, including education, healthcare, and infrastructure development. These responsibilities often exceed the revenue-generating capacities of the provinces, leading to dependence on transfers from the national government. In addition, [3] mentions that while this intergovernmental fiscal structure aims to ensure equitable service delivery, it also creates vulnerabilities when national finances are strained. In recent years, South Africa has experienced rising debt levels due to persistent budget deficits, slow economic growth, and external shocks such as the COVID-19 pandemic. Nevertheless, Covid-19 struck at a time when South Africa was already experiencing financial difficulties. Provincial governments are not directly responsible for national debt, but their budgets are significantly affected by fiscal consolidation efforts and reductions in transfers [4]. Furthermore, provinces face challenges in managing their own financial resources, including increasing contingent liabilities and inefficient expenditure patterns. Addressing these issues is critical for ensuring long-term fiscal sustainability and maintaining the capacity to meet developmental objectives [5]. The provincial governments in South Africa are grappling with the dual challenge of rising public debt and maintaining fiscal sustainability. National fiscal constraints have led to reduced allocations to provinces, straining their ability to deliver essential services. At the same time, inefficiencies in financial management, limited revenue-raising capacities, and mounting contingent liabilities exacerbate fiscal pressures [1]. Without targeted strategies to address these issues, provincial governments risk financial instability, reduced service delivery quality, and the erosion of public trust. It is against this background that the article seeks to achieve the following objectives • To identify the factors contributing to fiscal pressures in South African Provincial government. • To discuss key Challenges faced by South African provincial governments due to public debt and lack of fiscal sustainability. • To recommend measures to improve fiscal sustainability and debt management at the provincial level. Measures to improve fiscal sustainability and debt management at the provincial level: a case of… 21 Journal of Social Sciences September, 2025, Vol. 8 2. Literature Review 2.1 Guiding theory - Fiscal Federalism Theory Fiscal Federalism theory examines the allocation of fiscal responsibilities and resources among different levels of government. It provides a framework for understanding the fiscal challenges faced by country provinces, like South African provinces, particularly the tension between expenditure responsibilities and revenue constraints [6]. Fiscal federalism theory highlights the need for effective intergovernmental coordination and equitable resource distribution to achieve fiscal sustainability. According to [7] argues that the theory explores the principles of revenue generation, expenditure assignments, and intergovernmental transfers, which are critical in understanding the financial interdependencies and imbalances within a federal system. South Africa operates within a quasi-federal framework where provinces are constitutionally mandated to deliver key services such as education, healthcare, and infrastructure, but lack significant autonomous revenue-raising powers. The bulk of provincial revenues over 95% come from equitable share allocations and conditional grants from the National Treasury [2]. This creates tension between the expansive expenditure responsibilities of provinces and their limited ability to generate their own revenue. Furthermore, fiscal federalism theory advocates for fair resource allocation to reduce disparities among provinces. In South Africa, the equitable share formula is intended to address such disparities, but debates persist regarding whether the formula adequately accounts for provincial needs, particularly in rural and underdeveloped areas [8]. Provinces like the Eastern Cape and Limpopo receive larger transfers due to their higher levels of poverty and service delivery backlogs. However, these funds often prove insufficient to address the scale of infrastructure and human resource deficits [4]. In addition, the theory underscores the need for robust governance structures to ensure efficient use of resources. Mismanagement and corruption undermine fiscal sustainability, as seen in the Auditor-General’s reports highlighting irregular expenditure across provinces. In 2023, Limpopo’s Department of Education was flagged for irregular expenditure exceeding R1 billion, reflecting inadequate financial oversight and inefficiencies in resource utilization [9]. 2.2 Conceptualising Public Debit Public debt refers to the total amount of money that a government owes to external or internal creditors, including foreign governments, financial institutions, and private investors [10]. It is typically the result of borrowing to finance budget deficits, where government expenditure exceeds revenues. Public debt can take various forms, such as bonds, loans, or treasury bills. Public debt is a critical tool for economic management, enabling governments to fund infrastructure projects, public services, or emergency responses [11]. However, excessive public debt can burden future generations and lead to economic instability. As shown above, South Africa's provincial governments play a crucial role in delivering public services such as health, education, housing, and infrastructure development. However, they face significant challenges in balancing rising expenditures with limited revenuegeneration capabilities [12]. The provincial governments have limited autonomy to incur debt due to their reliance on equitable share allocations and conditional grants from the national government as prescribed by the Constitution of the Republic of South Africa, 1996. Public debt emerges indirectly through several ways such as unfunded mandates where provinces 22 B. Zindi, M. Mofolo Journal of Social Sciences September, 2025, Vol. 8 often bear the burden of providing services that exceed the funding allocated by the national government [13]. More so, public debt can be caused through contingent liabilities where provincial entities such as public utilities or state-owned companies can indirectly increase provincial financial pressures leading to public debt. Provinces may resort to alternative borrowing mechanisms, such as Public-Private Partnerships (PPPs), which can result in longterm financial commitments [14]. 2.2 The concept of Fiscal Sustainability Fiscal sustainability refers to the ability of a government to maintain its current spending, tax, and borrowing policies over the long term without risking insolvency or defaulting on its debt obligations [12]. Fiscal sustainability is also defined as the government's capacity to maintain solvency without increasing taxes, reducing expenditures, or resorting to deficit monetization [11]. Fiscal sustainability is essential for an economy and, consequently, for sustainable economic development. Post-financial crisis, South Africa experienced a substantial rise in public debt attributed to the execution of extensive expenditure initiatives aimed at economic support [13]. Fiscal sustainability for provinces depends on their ability to balance expenditures with available revenues without compromising future financial stability. Provinces’ face increasing costs for healthcare, education, and infrastructure due to population growth, urbanization, and socio-economic inequalities [2]. More importantly, provincial governments have restricted authority to raise revenue. They rely heavily on transfers from the national government, which are often insufficient to meet service delivery demands [4]. Many provincial governments lack robust mechanisms to monitor and manage debt, especially contingent liabilities arising from provincial entities [1] 2.3 An overview of public debt and fiscal sustainability in South African provincial governments Public debt and fiscal sustainability are critical concerns for South African provincial governments, which are tasked with delivering essential services. The delivery of these services, however, is often carried out under significant financial strain. As pointed out above, provinces primarily rely on national transfers, including the equitable share and conditional grants, to fund their operations [15]. While these transfers provide the bulk of provincial revenue, they often fall short of covering the rising costs of service delivery, leaving provinces financially vulnerable. Limited revenue-generation capacity further exacerbates the problem, as provinces lack substantial mechanisms to raise their own funds [3]. This reliance on national transfers restricts their fiscal autonomy and ability to respond to localized needs or emergencies. Figure 1. South African Gross Domestic Product: 1994-2021. Source: (South African Reserve Bank, 2022). Measures to improve fiscal sustainability and debt management at the provincial level: a case of… 23 Journal of Social Sciences September, 2025, Vol. 8 The diagram above presents a graphical representation of three key macroeconomic indicators as a percentage of GDP over the period from 1994 to 2021. The chart uses two different Y-axes. The Left Y-axis (LHS - Percentage of GDP) represents the fiscal balance (deficit/surplus) and the primary balance (deficit/surplus). The dashed blue line represents the fiscal balance, which fluctuates over time, showing periods of both surplus and deficit. A notable downward trend is observed after 2008, indicating increasing fiscal deficits. The orange line with markers represents the primary balance, which follows a similar trend to the fiscal balance but remains relatively higher in most periods. A sharp decline around 2008 and fluctuations afterward suggest economic shocks affecting public finance. The Right Y-axis (RHS - Percentage of GDP) represents net public debt, illustrated by the solid red line. The net public debt shows a consistent increase over time, with a noticeable upward trend beginning in the early 2000s. A sharp rise after 2010 suggests increasing borrowing levels, which accelerates significantly after 2019. The fiscal and primary balances were relatively stable between 1994 and 2007, but both declined significantly after the 2008 global financial crisis. Despite some periods of recovery, fiscal deficits persist, particularly post-2015, reflecting growing expenditure pressures. The net public debt steadily increases, particularly after 2008, and rises sharply post-2019, likely due to the economic impact of the COVID-19 pandemic and increasing government borrowing. The global economic recession of 2008–2009 affected various economies worldwide, including South Africa's. Government debt and fiscal deficits increased as a result of the inadequacy of monetary policy in promoting and sustaining economic growth. Output growth declined significantly from 3.6% in 2008 to -1.7% in 2009 [16]. A recovery took place in 2010, characterized by a growth rate of 2.9%, succeeded by a decline of 1.2% in 2015 [12]. Following the global financial crisis, South Africa's primary balance positions deteriorated, registering -3.1% in 2009 and -2.7% in 2010 (IMF, 2018). The primary deficit trend persisted from 2010 to 2017, declining from 2.8% in 2010 to -0.6% in 2017. The debt-to-GDP ratio of South Africa increased significantly from 22.2% in Q4 2008 to 46% in Q3 2016 [2]. From the fourth quarter of 2011 to the third quarter of 2016, the economic condition of the country exhibited weakness, as evidenced by an average primary balance ratio of -1.3% [14]. At the beginning of the 2012/13 financial year, the South African government implemented an expenditure limit, shifting medium-term expenditures from baseline projections to numerical targets [11]. This strategic move was aimed at improving fiscal discipline and curbing excessive government spending, ensuring that expenditure aligned more closely with revenue collection trends. By enforcing these numerical limits, the government sought to prevent unsustainable budget deficits while maintaining the delivery of essential public services. In 2014, the National Treasury took further steps to strengthen fiscal management by establishing the Fiscal Risk Committee. This committee was tasked with identifying, monitoring, and mitigating fiscal risks that could derail the government's financial targets. Through this initiative, the government aimed to enhance fiscal sustainability by proactively addressing economic uncertainties, debt vulnerabilities, and potential shocks to revenue collection. The 2016 Medium Term Budget Policy Statement (MTBPS) Fiscal Risk Statement acknowledged that South Africa had several institutional strengths that contributed to fiscal sustainability [17]. Among these strengths was the Public Finance Management Act (PFMA) of 1999, which provided a legal framework for transparent, accountable, and effective 24 B. Zindi, M. Mofolo Journal of Social Sciences September, 2025, Vol. 8 financial management in the public sector. The Medium-Term Expenditure Framework (MTEF) was another critical strength, facilitating multi-year budget planning and promoting predictability in fiscal decision-making. Additionally, the reduction in debt financing from domestic currency and bond markets helped manage the cost of debt servicing, ensuring that South Africa did not become overly reliant on expensive external borrowing. Despite these institutional strengths, the MTBPS Fiscal Risk Statement also highlighted significant risks. These included rising debt levels, economic stagnation, and fiscal pressures from State-Owned Enterprises (SOEs). The increasing reliance on borrowing, particularly to fund operational expenditures rather than capital investments, posed a longterm risk to fiscal stability. Additionally, persistent revenue shortfalls, declining investor confidence, and growing social spending pressures added to the complexity of achieving fiscal sustainability [9; 14.] Despite worsening financial conditions, decreasing economic growth, and inadequate regulation, South Africa's financial sector maintained effective financial management, credibility in fiscal policy, and transparency in its budgetary systems [18]. The government demonstrated fiscal credibility by increasing the primary surplus and decreasing the primary deficit in reaction to escalating public debt. The monetary policy strategies of South Africa for addressing fiscal debt and deficits rely on strict adherence to financial management protocols and the national budgeting process. Between 2009 and 2021, South Africa consistently faced deficits in its fiscal and primary balance-to-output ratios [9]. 2.4 Audit findings in South African provincial governments Although, the South African provinces are facing fiscal sustainability challenges, on the other hand, they appear to be having weak governance structures. This is evident from the Auditor-General of South Africa’s (AGSA) reports. AGSA plays a critical role in promoting accountability by auditing public sector financial management. However, the recurring findings in AGSA’s Annual Reports reveal significant inefficiencies, including fruitless, wasteful, and irregular expenditures, which compromise fiscal discipline and intensify funding shortfalls in provincial governments [19]. Irregular expenditure arises when procurement and financial transactions deviate from prescribed laws and regulations. This issue is frequently reported in provincial departments, reflecting weak compliance mechanisms and governance structures. Repeated audit findings showing mismanagement of public funds undermine citizens’ confidence in provincial governments’ ability to manage resources effectively [20]. In 2023, Limpopo’s Department of Public Works recorded over R1.2 billion in irregular expenditure and this amount included procurement processes that bypassed competitive bidding procedures, often due to inadequate oversight and collusion among officials [9]. The expenditure that could have been avoided, such as penalties for late payments or unused contracted services, contributes significantly to fiscal inefficiencies. The Eastern Cape Department of Health incurred millions in fruitless expenditure in 2022, including payments for ambulances that were never delivered and penalties on overdue invoices to suppliers [19]. Weak financial management systems and lack of capacity in provincial departments exacerbate inefficiencies [21]. Issues such as poor record-keeping, delayed reconciliations, and ineffective monitoring of budgets are prevalent. The Free State Department of Education failed to account for R800 million in conditional grant funding for school nutrition programs in 2022 due to incomplete records, leading to questions about the effective use of fund [19]. Measures to improve fiscal sustainability and debt management at the provincial level: a case of… 25 Journal of Social Sciences September, 2025, Vol. 8 Non-compliance with SCM regulations, such as failure to follow transparent procurement processes, is a major issue highlighted in AGSA reports. This results in inflated costs and compromised service delivery. The KwaZulu-Natal Department of Transport was flagged in 2023 for awarding contracts worth R500 million to unqualified suppliers, leading to substandard road maintenance projects [9]. Primary factors contributing to fiscal pressures in South African provincial governments South African provincial governments face persistent fiscal pressures due to a combination of external economic conditions, policy decisions, and internal inefficiencies. These factors strain their budgets, limiting their ability to deliver essential services and meeting their developmental mandates. The factors are discussed below. 2.5 External economic conditions The sluggish economic growth in South Africa has limited national revenues, hence diminishing equitable share payments to provinces that depend significantly on these transfers. In KwaZulu-Natal, reduced allocations have led to budgetary reductions in health and education, compelling the government to diminish essential infrastructure investments [22]. Inflation intensifies these constraints by elevating the expense of goods and services, especially in sectors like healthcare and education. The Gauteng province has experienced escalating healthcare expenses due to urban migration and population expansion, which have increased the need for medical services [12]. Furthermore, worldwide problems like the COVID-19 pandemic interrupted economic operations and heightened service delivery requirements, especially in Gauteng and the Western Cape, where escalating healthcare expenses resulted in budget excesses and postponed infrastructure initiatives [3]. 2.6 Policy decisions Policy decisions also contribute to fiscal pressures, especially where provinces are tasked with implementing unfunded mandates. In the Free State, the Department of Health has struggled with rising contingent liabilities due to medical negligence claims, without corresponding financial support from the national government [23]. In the Eastern Cape, a significant portion of the provincial budget is allocated to paying salaries for teachers and healthcare workers, leaving limited resources for developmental projects or infrastructure maintenance [17]. Similarly, rigid conditions attached to national grants, intended to address specific issues, often reduce provincial flexibility in addressing broader needs. Limpopo has faced challenges in utilizing conditional grants for housing, resulting in missed targets and growing housing backlogs [11]. 2.7 Internal inefficiencies Internal inefficiencies within provincial governments further deepen fiscal pressures. Mismanagement and corruption are pervasive issues, with Auditor-General reports frequently highlighting cases of irregular expenditure. Mpumalanga and North West provinces have faced scrutiny for misallocated funds that were meant for infrastructure projects, leading to delays and wasted resources [19]. Inefficient resource allocation is another common challenge. In the Eastern Cape, funds allocated for school infrastructure remain unspent due to poor planning and project delays, leaving learners in unsafe and inadequate facilities [24]. Additionally, growing contingent liabilities, such as lawsuits, are a burden on provincial budgets. The Free State’s Department of Health has accrued billions of rands in liabilities from medical negligence claims, further straining its financial capacity [9]. Many provinces 26 B. Zindi, M. Mofolo Journal of Social Sciences September, 2025, Vol. 8 also face lack of skilled personnel, which hampers the effective implementation of projects. For instance, in Limpopo, delays in housing project rollouts have been attributed to inadequate technical capacity within the Department of Human Settlements [12]. 3. Materials and Methods This article is based on a qualitative secondary literature review. Both grey and academic literature identified using ‘public debt’ and ‘fiscal sustainability’ as the key word in South African provincial governments were reviewed. Literature review was combined with abstraction since some of the issues raised in the article require in-depth analysis and not mere empirical evidence that is in the form of numbers as in quantitative studies or direct quotations of qualitative studies. The documents selected were widely published on public debt, debt sustainability, fiscal sustainability, financial repression and fiscal policy sustainability informed the writing of this article. There was no rigid criterion used to identify the texts that were used in this article. Instead, the authors relied on texts that provided detailed information on public debt and fiscal sustainability in South African provincial governments that are summarised in this study. This loose research approach, however, presents a particular limitation. It is the authors’ conviction that future researchers will be motivated to engage in writing more articles on evaluating the sustainability of the fiscal policy in South Africa. 4. Challenges faced by South African provincial governments South African provincial governments operate within a tightly constrained fiscal framework. Their primary source of funding comes from the national government in the form of equitable share allocations and conditional grants [25]. While these allocations aim to address inequality and ensure uniform service delivery, they are increasingly insufficient in the face of rising expenditure pressures. Fiscal sustainability in provincial governments is being tested by systemic inefficiencies, external economic challenges, and a growing reliance on national support amid declining revenue bases [8]. 4.1 Heavy reliance on national transfers Provinces in South Africa operate under a highly centralized fiscal framework, where the bulk of their budgets relies on equitable share allocations and conditional grants from the national government [2]. These transfers aim to address inequality and ensure equitable access to essential services such as education, healthcare, and infrastructure. Provinces lack significant own-revenue sources, depending on transfers that constitute over 95% of their budgets [1]. Reductions in national transfers due to fiscal consolidation efforts have left provinces with limited capacity to address pressing service delivery needs. The national government’s fiscal consolidation measures, aimed at curbing debt and reducing budget deficits, have directly impacted provincial allocations. During the 2023/24 budget cycle, provinces experienced a combined reduction of over R20 billion in equitable share allocations and conditional grants [19]. These reductions severely constrained provincial governments' ability to sustain critical services, forcing cutbacks in key areas. Provincial Department of Basic Education like the Eastern Cape and Limpopo faced difficulties in maintaining school infrastructure and staffing levels [9]. The Eastern Cape Department of Basic Education faced severe funding challenges in replacing unsafe mud schools. In 2023, budget reductions led to delays in the completion of 50 planned school infrastructure projects [24]. This hindered efforts to create safe and Measures to improve fiscal sustainability and debt management at the provincial level: a case of… 27 Journal of Social Sciences September, 2025, Vol. 8 conducive learning environments for rural learners. Reduced funding led to the delay of infrastructure projects aimed at replacing mud schools and unsafe classrooms, directly impacting learners' safety and access to quality education [26]. Additionally, teacher shortages became more pronounced, particularly in rural areas. Furthermore, conditional grants allocated for infrastructure projects, such as the Provincial Roads Maintenance Grant, were reduced, delaying critical upgrades to transport infrastructure. In provinces like the Free State and Western Cape this contributed to worsening road conditions, impeding economic activity and access to services [27]. The Western Cape government, although better resourced, struggled with increasing healthcare demands amid reduced funding. In 2023, delays in disbursing conditional grants affected the rollout of the province’s vaccination programs and expansion of healthcare facilities in rural districts [4]. With limited own-revenue sources and reduced national transfers, the Northern Cape government faced setbacks in maintaining its extensive road network. This hampered access to remote areas and negatively affected local economies reliant on agriculture and mining. 4.2 Rising contingent liabilities South African provincial governments operate under fiscal rules that restrict borrowing to prevent unsustainable debt accumulation. However, they face rising contingent liabilities, which include unpaid accruals, legal claims, and guarantees for public entities [2]. For example, the Eastern Cape Department of Health reported unpaid invoices exceeding R4 billion in 2022, highlighting the burden of accrued liabilities on fiscal sustainability [9]. These liabilities, while not direct debt, pose significant risks to provincial finances, potentially destabilising budgets and diverting resources from essential service delivery. Accruals arise when payments for goods and services procured by provincial departments are delayed due to budget constraints or inefficiencies in financial management [4]. The failure to pay suppliers within the prescribed 30-day period has become pervasive across provinces, creating a cascading effect on service delivery and supplier sustainability. The Eastern Cape Department of Health reported unpaid invoices exceeding R4 billion in 2022 [19]. This backlog strained healthcare delivery as suppliers withheld critical goods such as medicines and medical equipment, jeopardizing patient care. In addition, provinces face increasing legal liabilities due to litigation arising from service delivery failures, malpractice, and breaches of contract. Departments, particularly in healthcare and public works, are frequent targets of lawsuits, which often result in substantial financial settlements or judgments against the government. The Gauteng Department of Health faced medico-legal claims exceeding R20 billion in 2023 [9]. These claims stemmed from cases of medical negligence in public hospitals, including incidents of birth injuries and surgical errors, forcing the department to divert funds from critical operations to settle claims. Some provincial governments provide financial guarantees for public entities under their jurisdiction, such as development agencies and utilities. When these entities face financial difficulties, the provinces may be required to fulfill their obligations, adding to fiscal pressure [27]. In Limpopo, the provincial government provided support to the Limpopo Economic Development Agency (LEDA). Financial difficulties within the entity resulted in liabilities that the provincial treasury had to absorb, impacting its fiscal sustainability. More so, [28] pointed out that delays in paying suppliers and the diversion of resources to settle legal claims hinder the effective delivery of services in critical sectors such as education, healthcare, and