South Africa’s medium-term budget wins fiscal praise but growth doubts persist

Finance Minister Enoch Godongwana presented the Medium Term Budget Policy Statement (MTBPS) in the National Assembly in Cape Town on Wednesday, delivering a fiscal consolidation message that won cautious endorsement from business leaders while drawing sharp political attacks over the pace of reform and an election-linked fuel levy cut.

The Treasury revised down South Africa’s economic growth forecast for 2026 to 1.2% from the 1.6% projected in the February budget. The weaker outlook dominated reactions, with the Democratic Alliance (DA) arguing that far-reaching reforms are needed to lift growth to at least 3.5%. DA MP Kingsley Wakelin said the current trajectory is “not enough to move the needle on unemployment,” and called for “bold and far-reaching reforms beyond the Treasury.”

Business groups and analysts welcomed the government’s commitment to fiscal discipline but stressed that stabilising debt ratios means little without faster economic expansion. Business Leadership South Africa (BLSA) 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,” BLSA CEO Busisiwe Mavuso said. “Faster economic growth is the best way to address South Africa’s severe unemployment crisis.”

Standard Bank’s head of South African macroeconomic research, Elna Moolman, said the Treasury is shifting from stabilising debt to prioritising growth, using stronger-than-expected revenue to fund infrastructure investment. She cautioned that reforms to municipal finances and service delivery will take time to have an impact.

FNB’s medium-term budget review noted that the government has made progress in stabilising its finances but now needs to convert those gains into higher potential 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 warned that weak growth remains a major challenge, with the Treasury forecasting 1.2% in 2026 and 2% by 2029.

The mining sector echoed that view. The Minerals Council South Africa said reliable electricity, efficient rail and port infrastructure, water security and incentives for mineral exploration are critical to turning commodity prices into higher exports and jobs. “Fiscal consolidation and structural reform must reinforce each other,” the council said. “South Africa cannot sustainably strengthen its public finances without stronger economic growth.”

Other business voices highlighted opportunities for small and medium enterprises. Umesh Madhav, head of business banking coverage at Standard Bank South Africa, said infrastructure investment can create openings across sectors if businesses of all sizes can access them. PSG Financial Services chief economist Johann Els said the budget is “market friendly and ratings friendly,” with declining deficits and debt ratios strengthening sustainability. Mark Phillips of PPS Investments called fiscal stability “an important achievement” but said its lasting value will be measured by whether it creates conditions for a stronger economy and a more sustainable debt burden.

Political reactions were less restrained. The uMkhonto weSizwe Party (MKP) described the MTBPS as “rhetorical and a waste of time.” MKP MP Thulani Gamede said the timing of a fuel levy reduction — set to take effect on 4 November, the date of local government elections — showed the minister was campaigning for his party. “They don’t care about our South African people,” Gamede said.

The Economic Freedom Fighters (EFF) also accused Godongwana of using the fuel levy cut to boost the African National Congress’s electoral chances. EFF MP Sinawo Thambo questioned why the adjustment did not take effect immediately. “He’s using it to ensure that he enhances his political party’s chances at the polls,” Thambo said.

The United African Transformation (UAT) leader, Dr Wonderboy Mahlatsi, said the MTBPS failed to offer a comprehensive strategy to lower food prices for poor households. “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.

A separate opinion piece noted that positive fiscal indicators, including improved debt ratios, do not satisfy citizens’ demands for real economic growth and effective governance.

The MTBPS thus highlights a gap between fiscal consolidation — welcomed by markets and credit rating agencies — and the structural reforms needed to lift growth from the current 1.2% trajectory. Business leaders, opposition parties and analysts all converge on the same message: fiscal stability is necessary but insufficient without faster action on electricity, logistics, water and infrastructure to unlock investment and job creation.