Growth, infrastructure and sensible spending
The Medium-Term Budget Policy Statement (MTBPS) delivered by Minister of Finance, Enoch Godongwana, mid-November 2025 was unsullied by the brinkmanship that accompanied Budget 2025 in February. Instead of going back-and-forth on VAT increases, his presentation was mostly upbeat, signalling a commitment to economic growth, tighter fiscal discipline and more sensible government expenditure.
An uncertain, volatile world
In his opening remarks, the Minister of Finance lamented a fractured domestic landscape and a world dominated by intensifying global competition and mounting economic and political divisions. He countered this bleak world view with a rosier assessment of the country’s financial prospects. “As we table this policy statement, we have reason to be optimistic about the future of our country,” Godongwana said. His tone filtered through to media coverage of the event.
The Minister said government was making good on its promises to deliver economic growth and strengthen public finances while applauding the country’s removal from the Financial Action Task Force (FATF) grey list. “Exiting the grey list enhances our attractiveness to investors and make it easier to do business with us,” he said. After a bit of fluff around the then-pending G20 Leaders event in Johannesburg, the Minister conceded that the real challenge remained to accelerate economic growth enough to create jobs and reduce poverty.
Alas, the domestic GDP number is headed in the wrong direction again, with the latest forecast revised down from 1.4% to just 1.2%. Yes, we have doubled-up from the paltry 0.6% in 2024, but this is nowhere near fast enough to address long-term structural shortfalls. By comparison, global economic growth is pencilled in at 3.2% for 2025 despite the ongoing trade tensions, geopolitical uncertainty and supply chain disruptions the Minister made mention of.
As global investors revel in the artificial intelligence (AI) boom in Western financial markets, the best Godongwana could do was offer up the Africa Continental Free Trade Agreement and the Sub-Saharan Africa region as key investment opportunities.
Balancing expenditure and revenue
Isaac Matshego, senior economist at Nedbank, added some perspective in brief comments to Moneyweb, saying that the MTBPS did a great job of balancing the expenditure needs against the available revenue. He welcomed the improved revenue numbers but added a cautionary layer: “At the moment, that improvement is due to what can be considered once-off factors, like higher profits in the mining and retail sectors, as well as more collections by SARS,” he said. He cautioned that far more needed to be done to rein in state expenditure.
The MTBPS set out four pillars in support of faster growth and healthier finances including macroeconomic stability; structural reforms; building state capability; and supporting growth-enhancing infrastructure. “Fiscal and monetary policies, the twin pillars of economic governance, must work together to lower inflation and borrowing costs for households and firms while keeping debt-servicing costs affordable,” Godongwana said, expanding on the first pillar. No arguments here, dear reader.
The other big news was confirmation of a 3% inflation target following discussions between the Minister of Finance and the Governor of the South African Reserve Bank (SARB). This decision was widely reported on and supported. In its media commentary, the Banking Association of South Africa (BASA) wrote, “the 2025 MTBPS announcement of an inflation target of 3% provides policy certainty, strengthens the country’s macro-economic outlook and tackles the increasing cost of living that hits the most vulnerable, the hardest.”
Matshego acknowledged the important shift, calling it “a key positive” and adding that “confirmation of the adjustment of the inflation targeting framework removes a major uncertainty around coordination between the SARB and the National Treasury.”
A growing primary budget surplus
The MTBPS recommits to stabilising debt and growing the primary budget surplus in order to direct more resources towards infrastructure investments. According to Godongwana, South Africa is on track to stabilise debt-to-GDP at 77.9% by 2025-2026 and achieve a primary budget surplus of R68.5 billion. More good news came courtesy of the double windfall of 2025-2026 revenues beating forecast by R19.3 billion and a R4.8 billion reduction in debt service costs. Debt service costs are forecast to grow at 3.8% per annum over the coming three years, markedly slower than the 7.4% estimated in February.
Elna Moolman, Senior Economist at Standard Bank, told Moneyweb that the MTBPS deserved an eight out of ten. She said National Treasury had managed to keep South Africa on a stable fiscal trajectory, noting that the country was staying the course and “gradually seeing the fiscal improvements needed to put it on a more sustainable path.” Moolman added that, if this direction is maintained, the outlook for South Africa’s sovereign credit ratings could improve, which in turn would make it cheaper for the country to borrow. Hours later, S&P Global obliged by raising SA’s credit rating.
“South Africa has achieved two consecutive primary budget surpluses over the past two financial years, and that means the state can now fully fund its basic services with tax revenue rather than with more debt,” said Ryk van Niekerk, Editor at Moneyweb. On the minus side, “growth is still weak, corruption and inefficiency remain big problems, and budgets always look perfect in Excel.” Overall, however, Van Niekerk suggested the latest accounts showed signs of South Africa having turned a corner.
SARS having a field day
The better-than-estimated tax revenue collection could see the near R20 billion in tax hikes proposed for 2026-2027 set aside. “The Ministry of Finance will continue to monitor SARS’ revenue performance for the remainder of the year” and make a final decision on tax increases in the February 2026 Budget.
But before you get too excited, the higher-than-expected revenue performance in 2025-2026 still comes in short of the 2025 Budget estimate to the tune of R15.7 billion over the coming two years. Readers will have to hope the promised clampdown on illicit trade in alcohol, fuel, precious metals and tobacco is successful given that such activities “rob the fiscus of billions” each year.
Local businesses will no doubt welcome the shift in focus from consumption to investment expenditure. “We are leveraging public resources to mobilise private finance and expertise at scale to strengthen service delivery, improve spending effectiveness and drive higher economic growth,” the Minister said. “Amendments to triple-P regulations took effect on 1 June 2025, to unlock the potential across spheres of government and streamline approvals for smaller projects.” Public-private partnerships in the energy, logistics and water space look set to benefit from reconfigurations to the Budget Facility for Infrastructure.
Unfortunately, the more revenue a government collects, the more it spends. “Over the medium-term consolidated spending will increase from R2.6 trillion this year to R2.9 trillion in 2028-2029,” Godongwana said. The lion’s share of consolidated non-interest spending, approximately 61% over the next three years, funds the basket of government-provided services and benefits that reduce the cost of living for citizens. On the plus side, government has committed to a Targeted and Responsible Savings (TARS) initiative to identify duplication, eliminate waste and deliver value through its spending programme.
Addressing binding constraints
The Minister commented on structural reforms aimed at addressing binding constraints on the economy. Under the energy heading, he mentioned more than 2220 megawatts of solar, wind and battery projects in development before commending Eskom for bringing the final 800 megawatts from Kusile Unit 6 online. Reforms are also ongoing in the logistics and water space, largely assisted by the private sector. Case in point, 11 private train operators have secured slots on 41 routes across six rail transit corridors. And port efficiency is improving too.
In his concluding remarks the Minister declared the country was choosing growth, stability and reform and recommitting to an open and transparent budget process. He added that the various initiatives addressed in the MTBPS demonstrated government’s commitment to fiscal discipline and ensure that every rand spent contributes effectively to growth and service delivery.
Writer’s thoughts:
South Africa’s MTBPS 2025 was more upbeat than many expected, with firm promises on fiscal discipline and structural reform. Do you think the country is approaching a positive inflection point, or is caution still warranted? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
