Nicola Mawson|Published
South Africans want relief from rising living costs, but Finance Minister Enoch Godongwana is also under pressure to rein in government spending, reduce debt and demonstrate that any unexpected tax windfall will be put to productive use.
Those competing demands will be in focus when Godongwana delivers the Medium-Term Budget Policy Statement (MTBPS) in Parliament on Wednesday, against a backdrop of higher fuel prices, weak economic growth and mounting pressure on household finances.
Fuel-price relief is among the most immediate concerns, with September’s consumer inflation figures showing how quickly higher transport costs are feeding through to the economy.
Anchor Capital economist Dr Lerato Ntuli notes that headline inflation rose to 4.5% in September from 4.4% in August, although this was below the market consensus of 4.7%.
Transport inflation accelerated to 10.8%, contributing 1.5 percentage points to the headline rate after petrol increased by R1.34 a litre and diesel by approximately R3 a litre in September.
More coming
The pressure is unlikely to ease immediately.
October brought a further R3.33-a-litre petrol increase, while Central Energy Fund data through 20 October point to another possible adjustment in November.
Ntuli says higher international oil prices and a weaker rand are adding to the pressure, with Brent crude approaching $110 a barrel.
Any fuel-price relief announced in the MTBPS could moderate the inflation peak, she says, although it would be unlikely to materially change the broader near-term outlook.
The inflation figures also present a challenge for monetary policy. While core inflation eased to 4% and services inflation slowed to 4.9%, the Reserve Bank remains alert to the possibility that higher fuel costs will feed into other prices.
For households already struggling with groceries, transport and healthcare costs, even temporary relief would be welcome.
Price of everything
However, demands for immediate assistance come alongside calls for Treasury to strengthen the country’s finances rather than expand spending commitments.
Freedom Foundation CEO Leon Louw and consulting statistician Garth Zietsman want Godongwana to demonstrate progress on reducing government consumption and eliminating underperforming projects.
They say the minister should explain what has been achieved since the February Budget and commit to keeping central government spending within available revenue.
Their expectations are partly shaped by the possibility of stronger-than-anticipated tax collections.
Louw and Zietsman suggest that income tax, VAT and higher precious-metal prices could produce a revenue windfall of between R50 billion and R70 billion. If realised, they believe this could improve the primary budget surplus and leave the deficit lower than projected in February.
Limit spending
They also want firmer limits on government borrowing, arguing that greater fiscal discipline could help reduce financing costs. But they caution that stronger revenue collections may not be sustainable without faster economic growth.
Beyond the immediate numbers, the Freedom Foundation is calling for evidence that government is following through on its reform commitments.
Its proposals include opening energy, rail and ports to greater private competition, disposing of failing state-owned enterprises and introducing more rigorous scrutiny of public spending.
Louw and Zietsman also want zero-based budgeting, an online dashboard showing government expenditure in real time, and stronger accountability for municipalities.
They argue that revenue collected for services such as water and electricity should be used to pay suppliers or reinvested in those services.
Their broader wish list extends to reducing the size of Cabinet, easing exchange controls and cutting regulatory burdens on businesses.
Wish list
The pressure for targeted policy commitments is not limited to economic growth and government efficiency.
Public health advocates want the mini-budget to provide a clear timetable for reforming alcohol pricing, rather than leaving the issue for another year.
Kashifa Ancer, project lead for Rethink Your Drink, an alcohol harm-reduction campaign by the DG Murray Trust, is calling for minimum unit pricing to be introduced alongside excise tax reform.
Minimum unit pricing would establish a floor price based on the alcohol content of a product, particularly affecting cheap, high-strength drinks.
The campaign cites South African modelling suggesting that a minimum price of R3 per standard drink could reduce consumption among heavy drinkers by 11.9%, compared with 0.3% among moderate drinkers.
No substitute
These are population-level projections, not evidence that people living with alcohol dependence can simply change their drinking behaviour in response to prices. Alcohol use disorder is a medical condition requiring appropriate treatment and support.
“MUP gives government another lever to reduce harmful drinking without relying on excise increases alone,” Ancer says.
“But it is not a substitute. If excise taxes are reformed, MUP must come with them. The strongest approach is to use both tools together.”
Rethink Your Drink also wants stronger enforcement against illicit alcohol trading and policy decisions with implementation timelines ahead of the February 2027 Budget.
“Every year of delay comes at a cost to lives, public health services and children’s futures,” Ancer says.
Market watch
Financial markets, meanwhile, will be watching whether Godongwana can balance those competing demands without undermining fiscal consolidation.
André Cilliers of TreasuryONE notes that the rand has remained in a relatively narrow trading range ahead of the statement, with attention focused on inflation, living costs, fuel-price relief and utility tariffs.
Economists expect weaker growth forecasts and continued fiscal restraint, while improved revenue collection could provide some breathing room.
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