Opinion|Published
South Africa needs stronger fiscal discipline, reliable infrastructure and consistent policy to unlock private investment and create jobs, corporate finance expert Jason Hamilton argues ahead of Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS).
Hamilton, a guest lecturer in corporate and development finance at Stellenbosch Business School, says businesses need greater certainty about government spending, infrastructure delivery and economic reforms before committing capital to expansion and employment.
Fiscal discipline must translate into delivery
When Godongwana tables the MTBPS on Wednesday, businesses will be looking for a clearer basis on which to make investment decisions, Hamilton says. This applies to small businesses considering new hires as well as companies weighing major expansions.
Sound public finances, reliable infrastructure, consistent policy and confidence that commitments will be delivered all influence investment decisions, including the funding available and the returns businesses need to justify spending.
Hamilton argues that greater attention must be paid to the gap between policy announcements and the point at which businesses can act on them.
In February, National Treasury projected that gross government debt would stabilise at 78.9% of gross domestic product (GDP) in 2025/26 before declining to 77.3% in 2026/27. It also indicated that a proposed fiscal anchor would be brought forward in the MTBPS.
Hamilton says the statement needs to explain how that trajectory will be maintained as economic conditions change.
Slower growth and unemployment raise pressure
The economic outlook has become more difficult. Treasury forecast growth of 1.6% for 2026 in February, while the South African Reserve Bank projected 1.2% in September and raised its policy rate to 7.25% in response to renewed inflationary pressure from global supply shocks.
Official unemployment reached 33.6% in the second quarter.
Hamilton says growth at these levels leaves little room to address South Africa’s employment challenge.
There have been some positive signals from rating agencies. In May, S&P retained a positive outlook and affirmed South Africa’s BB foreign-currency rating, while Moody’s moved its outlook to positive and affirmed its Ba2 rating.
However, Hamilton cautions that further improvement depends on delivery, and a positive outlook does not mean a rating upgrade has already taken place.
Infrastructure remains critical to investment
A stronger fiscal position can help build confidence, but Hamilton says businesses can still be deterred by unreliable water supplies or delays in connecting to the electricity grid.
He argues that fiscal discipline and practical reform must advance together, with the MTBPS providing greater clarity on government’s choices.
Revenue assumptions should be realistic, new commitments properly funded and risks associated with state-owned companies clearly disclosed. Hamilton also points to the need to improve spending efficiency while protecting priority expenditure.
Infrastructure investment is central to this effort. Support from the World Bank for electricity, freight transport and water reforms reinforces the link between functioning infrastructure, private investment and employment.
For investors, projects become viable when approvals are in place, procurement is credible, contractual responsibilities are clear and repayment arrangements are reliable.
Hamilton says government should pay greater attention to project preparation and the capacity of public institutions, while measuring progress against clear delivery commitments. Maintenance must also be funded alongside new infrastructure investment.
Private-sector participation can help, provided risks and public obligations are transparent and allocated appropriately.
Lower business costs and better access to finance
Hamilton says simpler licensing, predictable administration and prompt payment of valid invoices could make a significant difference, particularly for small and medium-sized enterprises (SMEs).
He argues that government should improve spending and tax administration before assuming compliant businesses and households can continue carrying additional burdens.
Businesses, meanwhile, must make investment decisions based on sound commercial reasoning rather than waiting for every economic challenge to be resolved.
Hamilton also calls for broader access to suitable finance, pointing to the International Finance Corporation’s work supporting SME lending, trade and supply-chain finance, alongside training and business support.
He says businesses should be helped to develop the financial information and management capabilities needed to use funding effectively.
Some investments can improve efficiency under a range of conditions, while others depend on specific reforms being completed. Where possible, Hamilton recommends committing capital in stages and setting clear criteria before proceeding further.
Businesses must prepare for global risks
The external environment also affects investment decisions. The World Economic Forum’s Global Risks Report 2026 ranks geoeconomic confrontation as the leading near-term risk, based on its survey of leaders and experts.
Hamilton says businesses should review their exposure to trade risks, supplier concentration and alternative routes to market. Scenario planning is useful when it identifies how a company will respond as conditions change and who has the authority to act.
MTBPS must build confidence in the economy
Hamilton says the MTBPS offers government an opportunity to provide greater clarity on the direction of the economy and the decisions needed to support investment.
Government must follow through on reforms and improve the use of public resources, while businesses need to manage risk, develop their people and invest where they can create sustainable value.
The test over the following months, he says, will be whether these commitments make it easier for companies to expand and employ more people.
Hamilton is a guest lecturer in corporate and development finance at Stellenbosch Business School.