Nicola Mawson|Published
South Africa has turned a corner on its public finances, but Finance Minister Enoch Godongwana warned on Wednesday that converting fiscal stability into faster growth is the harder task ahead, as a deteriorating global environment threatens to erode hard-won gains.
Delivering the Medium-Term Budget Policy Statement in Parliament, Godongwana said debt as a percentage of gross domestic product was falling for the first time in nearly two decades.
The debt-to-GDP ratio has stabilised at 78.4% in 2025/26, Godongwana said, noting that this was the first time in two decades. The budget deficit is narrowing to 3.9% of GDP, better than the 4% forecast in February, while the primary surplus is rising from 1.7% of GDP this year to nearly 3% by 2030.
All three major credit rating agencies announced positive rating actions on South Africa earlier this year, Godongwana said.
But the global environment has deteriorated since February. “Growth remains too low,” Godongwana acknowledged.
The Israel-US attack on Iran closed the Strait of Hormuz, pushing up global oil, food and energy prices. Global growth is now estimated at 3.1% in 2026, down from 3.3% projected in January, and Treasury has revised its domestic growth forecast to 1.2% for 2026, from 1.6% in February.
Fuel relief
The most immediate response to cost-of-living pressure is a temporary fuel levy cut. Godongwana announced that, from election day on 4 November, the levy will be reduced by R3 per litre for diesel and R1.50 per litre for petrol until 1 December, with smaller reductions continuing until 5 January 2027.
The R10 billion fiscal cost will be funded by returning funds previously transferred to the Central Energy Fund to the National Revenue Fund, the minister said.
Gross tax revenue has been revised upwards by R17.1 billion compared with the February estimate, driven by corporate tax, dividends tax and VAT.
Godongwana cautioned that much of the improvement reflects higher commodity prices and will not persist. A further R38.1 billion in savings has been identified over the medium term, including R13 billion from reducing fraud in social grants.
Draft fiscal anchor legislation, released for public comment in October, requires each administration to set its own fiscal objectives and report against them at every Budget. It is expected to be tabled in Parliament in 2027.
Building for growth
The additional revenue allows expenditure to increase by R45.5 billion compared with February.
The Infrastructure Finance and Implementation Support Agency is supporting projects with a potential investment value of more than R217 billion, while the Credit Guarantee Vehicle has secured conditional commitments of $553 million from development partners and is expected to be operational by 2027.
On gender-based violence, R3.8 billion has been allocated to hire more than 3,500 social workers, with sexual offences courts expanding from 55 to 101.
Consolidated government expenditure grows at 3.6% per year to R3 trillion by 2029/30, with capital investment the fastest-growing item at 5.3% annually. “If we stay the course,” Godongwana said, “growth could exceed 3% per annum.”
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