South Africa's economic problems call into question Godongwana's mini-budget
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South Africa's economic problems call into question Godongwana's mini-budget

The unfavorable economic situation in South Africa, characterized by weak growth, increasing national debt, and rising pressure on the cost of living, will be under close scrutiny during Finance Minister Enoch Godongwana's presentation of the Medium-Term Budget Policy Statement (MTBPS) today. This comes against a backdrop of public demands for increased investment, improved public spending, and assistance for struggling households.

According to the Presidential office, President Cyril Ramaphosa is also expected to attend Parliament to present the MTBPS. Godongwana will present the National Treasury's economic outlook, government priorities, and plans for revenue and expenditure over the next three years, thereby setting the direction for the next national budget.

Presenting the economic assessment ahead of the statement, Siseko Maposa, director of the consulting firm Surgetower Associates Management Consultancy, warned that the government can no longer hide the country's deep economic problems behind optimistic promises. In his view, the 2026 MTBPS is unlikely to conceal the serious structural crises facing the country, despite eloquent rhetoric, as was the case in previous cycles.

Maposa pointed to persistently low growth, high national debt, and a population growing faster than the economy as key issues. He estimated the national debt at between 77.5% and 78.5% of GDP and noted that transport and logistics disruptions, along with global energy shocks driving up fuel prices, have intensified pressure on households.

Maposa also cautioned that simply cutting spending will not solve the country's economic problems, as debt servicing consumes a significant portion of government revenue. He stated that 'defensive austerity alone will not save the fiscal structure.' Instead, Maposa advocated for targeted investments in infrastructure and logistics, arguing that these sectors can stimulate economic activity, boost productivity, and help pull the economy out of stagnation.

The question of whether the government's efforts to control debt are making tangible progress is also a point of criticism from the EFF, which disputes the focus on achieving a primary budget surplus. The 2026 budget projected a primary surplus of 0.9% of GDP in 2025/26, expected to rise to 1.6% in 2026/27 and 2.3% by 2028/29. The government also forecasts debt stabilization at 78.9% of GDP. A primary surplus occurs when government revenues exceed expenditures, excluding interest payments on debt, which the Treasury believes helps reduce borrowing needs and interest costs.

However, the EFF argued that improving these figures is insignificant if unemployment remains high and people continue to struggle to access basic services. The party stated: 'Celebrating a surplus while unemployment rises is celebrating the wrong balance sheet.'

Beyond debates over debt and spending, the government is also facing calls for immediate assistance to households grappling with rising transport and food prices. Dr. Mmusisi Maimane, leader of Build One South Africa (BOSA), called for a temporary reduction in the general fuel levy, arguing that high fuel prices place additional pressure on consumers. Maimane insisted that a special allocation of 10 billion rand intended for fuel assistance be used to reduce the levy by 3 cents per liter in November. BOSA also demanded an investigation into the road insurance fund component within the fuel levy, expressing concern over the efficiency and management of this fund.

Fiscal policy is also being criticized for its role in addressing social problems related to harmful alcohol consumption. Kashefa Anser, project lead for the Rethink Your Drink campaign aimed at reducing alcohol harm from the DG Murray Trust, wants the MTBPS to clarify whether the government intends to implement a Minimum Unit Price (MUP). This policy would set a minimum price for a standard drink, making cheap hard liquor less accessible, especially to heavy consumers. Anser noted: 'These events show that the government understands that pricing and packaging sizes influence consumption patterns, and if we want to tackle alcohol harm, we must prevent excessive consumption.'

The campaign advocates for introducing MUP alongside changes to alcohol excise duties, not instead of them. Anser emphasized: 'MUP gives the government another lever to reduce harmful consumption without relying solely on tax increases. But it is not a replacement. If excise duties are reformed, MUP must accompany them. The strongest approach is to use both tools together.'

Cosatu party committee coordinator Matthew Parks stated that workers are besieged because 'unemployment is rising to dangerously high levels at 43.8%, the economy continues to develop sluggishly with an anemic growth of 1.2%, and working communities suffer from poverty, inequality, crime, and corruption.' He added: '2026 was particularly difficult due to the war in the Middle East, which led to a sharp rise in oil prices, hitting South Africa with gasoline prices increasing by more than 25% and diesel by 50%. This triggered inflation, caused two repo rate hikes, and pushed workers into even greater destitution.'

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Oil shock and slowing growth put South Africa's finances under pressure ahead of budget publication
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Oil shock and slowing growth put South Africa's finances under pressure ahead of budget publication

South Africa's financial position is threatened by the oil shock in the Middle East, weakening economic growth, and rising expenditure pressures, despite higher tax revenues. These factors create serious difficulties for the Ministry of Finance ahead of the mini-budget publication on Wednesday.

Economist from Anchor Capital, Dr Lerato Ntuli, warned that Finance Minister Enoch Godongwana faces a much more complex economic environment than when presenting the budget in February, even though government revenues exceeded expectations.

The Medium Term Budget Policy Statement (MTBPS), scheduled for October 21, comes against the backdrop of rising global oil prices, which increases costs for transport, production, and households. Furthermore, tighter monetary policy is intensifying pressure on an already struggling economy.

Ntuli noted that the main task will be to account for the economic consequences of the energy shock without undermining debt stabilization progress or jeopardizing confidence in the fiscal system.

No respite

According to data from the International Monetary Fund (IMF) and Anchor Capital, the average oil price is expected to reach around $96 per barrel in 2026, approximately 41% higher than in 2025. The IMF also forecasts a slowdown in global growth to 3.1% this year compared to 3.5% in 2025, with inflation projected to reach 4.7%.

For South Africa, which relies on oil imports, the consequences go beyond just higher fuel prices. Ntuli warned that increased costs for logistics, transportation, and production could reduce corporate profits, hinder hiring and investment, and decrease household purchasing power.

These problems arise as the domestic economy is already losing momentum. Real GDP contracted by 0.2% in the second quarter of 2026, ending a six-quarter period of growth. Annual economic growth slowed to 0.9% from 1.9% in the first quarter. Inflation has also become less favorable: in August, it rose to 4.4% from 4.3% in July. The South African Reserve Bank raised the repo rate by 25 basis points to 7.25% in September, increasing borrowing costs for businesses and households.

Not all bad news

Nevertheless, the Ministry of Finance begins the MTBPS with some encouraging revenue figures. Anchor Capital reported that the fiscal deficit in August was R29 billion, the lowest figure for that month in eight years, and the primary budget surplus increased to approximately 1.4% of GDP.

Corporate income tax collection rose by 18.5% year-on-year in August, and over 20% for the financial year to date. Domestic VAT receipts were also higher than expected, increasing by approximately 8% compared to the February projection of 4.5%.

However, Ntuli cautioned that this improvement may be unsustainable. She noted that personal income tax receipts are partly due to lower-than-expected refunds, despite slower wage growth. Similarly, VAT receipts were supported by a slowdown in refund payouts.

Ntuli added that the fuel levy collection is already showing the impact of government measures to protect drivers from price hikes. In August, the levy was about 15% lower year-on-year, reflecting the easing of the fuel levy and reduced demand.

Under pressure

Meanwhile, Ntuli pointed out that expenditure pressure is growing at national and provincial levels, especially in service delivery sectors. Although debt servicing costs rose slower than anticipated, Ntuli warned that prolonged global uncertainty and higher interest rates could reverse this trend.

She stated: 'Most of the revenue overshoot appears cyclical, not structural, while spending is rising.'

Anchor Capital expects the Ministry of Finance to lower its growth forecasts, acknowledge higher inflation risks, and adopt a more cautious fiscal stance than presented in February.

Ntuli demanded greater clarity regarding the government's proposed fiscal anchor, including measurable debt or expenditure targets, mechanisms to ensure compliance, and a legislative timeline. Furthermore, she insists on an explanation of how any successor to the social grant will be funded if it expires in March 2027. She stressed that any measures to support households and businesses against rising fuel and living costs must be temporary, targeted, and fully funded.

Ntuli concluded: 'Temporary supply shocks should not lead to permanent increases in spending or weaken the fiscal position.'

Accelerate reforms

Other priorities include updating state-owned enterprise financial risk assessments, reliably determining the cost of National Health Insurance, and protecting infrastructure investments. Ntuli also called for accelerating reforms in railways, electricity, regulation, and visa regimes to support economic growth.

In turn, PSG senior economist Johann Els expects stronger revenue inflows to improve the fiscal outlook, potentially bringing a tax windfall of R50 billion or more. He believes the deficit could shrink to around 3.5% of GDP in the current fiscal year compared to the February forecast of 4%.

However, Investec chief economist Annabel Bishop warned that spending is already exceeding budget targets for the current period, with a preliminary deficit of R189 billion for the first five months of 2026/27. Bishop forecasts that the full-year deficit will remain around 4% of GDP, with a risk of reaching 4.1% if overspending continues.

For Ntuli, the priority is ensuring that temporary revenues strengthen public finances rather than funding obligations the government cannot meet. She stated: 'The MTBPS must use the current revenue surplus to strengthen public finances, not to create space for unfunded expenditure commitments.'

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