South Africa's growth downgrade tests fiscal credibility as business calls for faster reforms

Finance Minister Enoch Godongwana delivered the Medium Term Budget Policy Statement (MTBPS) in Parliament on Wednesday, cutting South Africa's 2026 economic growth forecast to 1.2% from the 1.6% projected in February. The downgrade underscored the country's persistent structural weaknesses and drew a divided political response, while business leaders welcomed the government's fiscal discipline but warned that low growth remains the critical challenge.

The Democratic Alliance (DA) said the current growth level is insufficient to address unemployment. DA Member of Parliament Kingsley Wakelin called for bolder reforms. "The DA believes that faster and more far-reaching growth reforms are now urgent. The 2026 MTBPS cuts this year's growth forecast from 1.6% to 1.2%. This is not enough to move the needle on unemployment. Bold and far-reaching reforms beyond the Treasury are now essential. With a clear goal, we need to grow to at least 3.5%," Wakelin said.

The uMkhonto weSizwe Party (MKP) dismissed the statement as "rhetorical and a waste of time." MKP MP Thulani Gamede accused the minister of using the budget to campaign for the African National Congress (ANC) ahead of local government elections scheduled for 4 November. "Looking at the dates, the start date of that reduction on the 4th of November, what does it say to you? It tells you that the Minister of GNU (Government of National Unity) was actually here to campaign for his own organisation and their own GNU," Gamede said.

The Economic Freedom Fighters (EFF) echoed that criticism, arguing that the reduction in the fuel levy — set to take effect on voting day — was designed to boost the ANC's electoral prospects. EFF MP Sinawo Thambo said the party believes the fuel reduction is being abused to garner votes. "He's using it to ensure that he enhances his political party's chances at the polls on the 4th of November because why does he not adjust a fuel levy today (Wednesday) and wait for the 4th of November, which is voting day, and then adjust it downwards within a month, and then our people go back to the same situation," Thambo said.

United African Transformation (UAT) leader Dr Wonderboy Mahlatsi said the MTBPS failed to provide a comprehensive strategy to lower food prices for poor South Africans. "While temporary fuel levy relief may reduce transport costs in the short term, there is no comprehensive strategy to lower food prices, strengthen local food production, or expand land-based economic opportunities for disadvantaged communities," Mahlatsi said.

**Business: fiscal stability not enough**

Business leaders broadly welcomed the government's commitment to fiscal discipline but stressed that a declining debt trajectory means little without stronger growth. Business Leadership South Africa (BLSA) CEO Busisiwe Mavuso said the proposed fiscal anchor could improve policy certainty and lower borrowing costs. "The core focus from here is to ensure that the stability translates into delivery. Faster economic growth is the best way to address South Africa's severe unemployment crisis," Mavuso said. "This is a long-term process, which is why every effort to accelerate delivery matters, especially on structural reforms and infrastructure."

Standard Bank group's head of South African macroeconomic research, Elna Moolman, said the Treasury was shifting focus from stabilising debt to driving growth, using stronger-than-expected revenue collections to fund infrastructure investment. "The focus is now shifting to prioritising economic growth, with the Treasury expecting increased infrastructure spending to boost growth and employment," Moolman said.

FNB's medium-term budget review noted that the government has made progress in stabilising its finances but now needs to translate fiscal improvements into stronger growth. "Critically, the [medium-term budget] passes the fiscal credibility test, but the ultimate test will now be whether the government can convert improved fiscal stability into higher potential growth," FNB said. The bank forecast growth of 1.2% in 2026 and 2% by 2029.

The mining sector echoed the call for faster reform. The Minerals Council South Africa said reliable electricity, efficient rail and port infrastructure, water security and incentives for mineral exploration are critical. "South Africa cannot sustainably strengthen its public finances without stronger economic growth, and stronger growth requires faster implementation of reforms in electricity, rail, ports and water," the council said.

PSG Financial Services chief economist Johann Els said the budget reinforced fiscal consolidation, with declining deficits and primary surpluses supporting investor confidence and the prospect of credit ratings upgrades. Mark Phillips of PPS Investments said weak growth, high debt-service costs and the slow pace of debt reduction remain concerns. "Fiscal stability is an important achievement. Its lasting value will be measured by whether it creates the conditions for a stronger economy and a more sustainable debt burden," Phillips said.

**Civil society: jobs and services**

The Congress of South African Trade Unions (COSATU) said the MTBPS needs to inspire hope amid stagnant growth, high unemployment and service delivery failures. COSATU Parliamentary Coordinator Matthew Parks called for investment in public services, stabilisation of local government, and more funding for state-owned enterprises to reduce the cost of electricity and transport. "We need to expand opportunities for employment for millions of people who are unemployed and just can't find work by expanding public employment programmes in the public sector by providing artisanship programmes in the private sector," Parks said.

In the Eastern Cape, where the unemployment rate exceeds 47% and youth unemployment tops 50%, residents expressed hope that the budget would stimulate growth and create jobs. South African Youth Council Provincial Executive Member Zikhona Matyila said the budget should prioritise funding and mentorship for young entrepreneurs, alongside investment in basic services. "If water, electricity and roads are being serviced, then it means more factories are open, and young people can get jobs from there," Matyila said.

An opinion piece on Iol noted that while the budget reveals positive fiscal indicators, citizens yearn for real economic growth and effective governance beyond improved debt ratios. The Citizen reported that experts had expected the MTBPS to deliver a tax windfall and possible relief on fuel prices.