Government’s commitment to ensure economic progress is bearing fruit.
The after the past few years has seen the country on the back foot of the effects of state capture, the COVID-19 pandemic, low growth as well as rising expenditure and debt.
This is according to Finance Minister Enoch Godongwana, who delivered the Medium-Term Budget Policy Statement (MTBPS) in Parliament on Wednesday.
Godongwana noted that damage from stringent challenges “demanded that we change course”.
“Government committed itself to move away from fiscal fragility towards one of stable, credible and sustainable public finances. We limited bailouts of state-owned entities, funded new commitments responsibly and prioritised investment over unsustainable consumption.
“Before this very house, we were honest about the choices before us. We made it clear that government could not fund every demand at once without risking the country’s fiscal future.
“Today, that commitment is beginning to pay off,” Godongwana told Parliament.
Importantly government began to address debt, ultimately stabilising debt in the 2025/26 financial year.
“Debt as a percentage of GDP [gross domestic product] is now falling, creating a stronger foundation for investment, growth and job creation.
“Earlier this year, all three major global credit rating agencies announced positive rating actions on South Africa, despite a challenging global environment.
“The fiscal space created through disciplined budgeting allows us to protect frontline services, preserve the jobs of teachers, doctors and nurses, while protecting the social wage for the most vulnerable,” the Minister stated.
Economic outlook
Godongwana noted that South Africa’s risks to the outlook remain elevated due to various issues.
“A prolonged conflict in the Middle East, alongside El Niño and its likely impact on producer costs and output, could further weaken domestic growth.
“Domestic economic activity has already lost some momentum, especially in export-linked sectors. We now forecast real economic growth of 1.2% in 2026, down from the 1.6 % projected in February,” he stated.
In 2027, growth is expected to bounce to 1.6%, rising to 2% by 2029.
Despite the challenging times, the South African economy has shown resilience backed by fiscal discipline and a lower inflation target, helping to “contain borrowing costs and reduce South Africa’s risk premium”.
“The Rand has strengthened and become less volatile. This reflects the difficult choices we have made to preserve macroeconomic stability and fiscal sustainability.
“But, growth remains too low,” he acknowledged.
To address that, sharp focus is being placed on implementing structural reforms together with strengthening state capability and delivering public infrastructure.
“This will put the economy on a faster, more sustainable growth trajectory.
“If we stay the course, growth could exceed 3% per annum,” Godongwana stated.
Fiscal strategy
The Minister stated that South Africa’s fiscal strategy rests on four main pillars, namely:
• Supporting growth through prudent fiscal policy and increased capital investment; implementing structural reforms
• Improving value for money by driving efficiencies, reducing waste and prioritising spending that delivers results; supporting growth-enhancing public infrastructure investment
• Reducing debt-service costs while managing the debt burden responsibly
• Embedding fiscal sustainability through a principle-based fiscal anchor
“This strategy remains on course. In fact, it is already yielding results.
“For the first time in nearly two decades, our debt-to-GDP stabilised at 78.4% of GDP in 2025/26,” the Minister stated.
The primary surplus, where government revenue exceeds non-interest spending, also continues to grow.
“We are increasing it from 1.7 % of GDP this year to nearly 3% by 2030. This will allow us to reduce borrowing, contain debt-service costs and create more space for growth-enhancing investment and essential public services.
“The budget deficit is also better than we expected in February.
“It will now narrow to 4.3% of GDP this year compared to the 4.5% forecast at the time of the Budget. By 2030, we see the deficit falling to 2.5% of GDP,” he said.
Ensuring sustainability
The National Treasury describes fiscal sustainability as the ability of the state, under reasonable macroeconomic and fiscal assumptions, to “meet its present and future expenditure and debt-service obligations and to manage its fiscal risks, without undermining macroeconomic stability and without requiring an unrealistically large or abrupt future correction to revenue or expenditure”.
In response to this, Godongwana stated that to safeguard the advances made, government has released the draft fiscal anchor legislation for public comment in October, with the expectation that it will be tabled in Parliament next year.
The anchor is aimed at embedding prudent management of the public finances across administrations.
“The proposed legislation sets out fiscal sustainability as a standard into the Public Finance Management Act instead of a rigid numerical rule.
“It requires each Administration [following every General Election] to commit to its own fiscal objectives, consistent with the electoral mandate. It then reports against it at every Budget and explain any material deviation to Parliament.
“Fiscal sustainability cannot depend on the commitments of a single administration,” the Minister said.
In this regard, the Financial and Fiscal Commission will be responsible for independently reporting on the “consistency of the fiscal framework with the administration’s fiscal plan”.
“This approach preserves flexibility in changing economic conditions while strengthening transparency, accountability and fiscal discipline.
“Most importantly, it helps to ensure that developmental priorities and constitutional obligations are pursued at a pace that public finances can sustain.
“That is how we protect our economic future and our constitutional commitments. – SAnews.gov.za
