On 12 November 2025, Finance Minister Enoch Godongwana delivered South Africa’s (SA) Medium-Term Budget Policy Statement (MTBPS), a key mid-year fiscal update that reviews performance against the February Budget, reallocates spending where needed, and recalibrates priorities for the year ahead. This year’s MTBPS was presented against a more constructive backdrop than earlier in the year, with broader consultation within the Government of National Unity (GNU) and improved in-year fiscal performance helping to set a more measured, market-friendly tone.
The market response was quick and positive. The rand strengthened, bond yields eased, with bullish sentiment around “SA Inc.” Two announcements stood out. First, the National Treasury (NT) reduced weekly fixed-rate government bond issuance from R3.75bn to R3bn. This larger-than-expected cut signalled confidence in funding conditions and a smaller borrowing requirement. Second, the finance minister formally endorsed a 3% inflation target, with a 1% tolerance band, thereby aligning fiscal and monetary policy. While the South African Reserve Bank (SARB) had already been informally targeting this level, the formal adoption by Treasury cements a clear and cooperative policy framework that enhances credibility and reinforces the SARB’s independence.
Together, these announcements marked a shift in tone. The MTBPS reflected a commitment to coordination, prudence, and discipline- key ingredients for investor confidence. One of the most notable outcomes is that gross loan debt is still projected to peak this year, albeit at a higher rate.
Treasury expects debt to stabilise at 77.9% of GDP in FY25/FY26, marginally better than previously pencilled in by market expectations. Debt-service costs are also moderating, reflecting the impact of lower inflation, a stronger rand, and improved funding conditions. The consolidated budget deficit is projected to narrow gradually from 4.7% of GDP in FY25/FY26 to 2.9% by FY27/FY28.
Figure 1: SA government debt forecasts as a percentage of GDP, %
Source: NT, Anchor
Revenue performance was slightly better than expected, with an upward revision of R19.7bn for the current fiscal year, driven by stronger VAT, corporate tax, and fuel levy collections. This reflects a combination of resilient household spending, commodity-linked corporate performance, and improved efficiency at the South African Revenue Service (SARS). However, the medium-term outlook for revenue is more subdued, as lower inflation and weaker nominal GDP growth narrow the tax base. On the expenditure side, total spending was revised R36bn lower over the medium term relative to the May 2025 Budget, primarily reflecting savings from a softer inflation trajectory and underspending in certain departments.
Encouragingly, Treasury is using this fiscal breathing room to reorient spending toward growth-enhancing investment. Infrastructure outlays remain a priority, with payments for capital assets set to grow by 7.3% over the medium term – the fastest among all spending categories. Additional allocations were made to rehabilitate Transnet infrastructure, support disaster recovery, and fund capital injections into the new credit guarantee vehicle (CGV). The CGV has been established by the government primarily to de-risk infrastructure projects and mobilise private capital for SA’s energy and climate goals. It is expected to be operational in June 2026 and will issue guarantees for projects. While the National Treasury will inject the initial funding, the CGV will be a majority privately owned, regulated non-life insurance company.
At the same time, Treasury is pushing ahead with its new multi-year budgeting and procurement reforms. The Targeted and Responsible Savings (TARS) initiative, performance-based frameworks, and a new Procurement Payments Dashboard are designed to eliminate duplication, enhance transparency, and improve efficiency in public spending. The government has also begun auditing payroll data to detect “ghost workers,” strengthening accountability at provincial and national levels.
These reforms mark a shift toward building credibility not just through targets, but through implementation. For years, weak oversight and poor coordination undermined SA’s ability to deliver value for money. If these new frameworks gain traction, they could help create the fiscal space needed to protect core services while increasing productive investment. The key will be maintaining momentum and avoiding political interference that could erode progress.
Still, the fiscal outlook is not without risks. Weaker global growth, commodity price volatility, and the precarious financial health of several state-owned entities (SOEs) all remain significant vulnerabilities. High debt redemptions will continue to sustain large borrowing requirements, and the slow pace of structural reform (particularly in energy, logistics, and local government) continues to constrain growth. Political uncertainty within the GNU also introduces potential policy execution risk.
Nevertheless, despite these challenges, the overall message from this year’s MTBPS is one of cautious stability. The combination of reduced bond issuance, alignment of inflation objectives, and improved spending discipline has been well received by markets and signals a stronger commitment to consolidation. In the short term, these steps should ease funding pressures, lower borrowing costs, and support a firmer rand- creating room for the SARB to consider monetary easing later in 2026. Over time, consistent delivery and credible reform could help lower SA’s risk premium, attract investment, and support a more durable growth trajectory.
