South Africa's mid-term budget heads for growth cut, debt-stress reality check

**JOHANNESBURG** — South Africa's Medium-Term Budget Policy Statement (MTBPS), tabled in Parliament on Wednesday, is expected to serve as a reality check rather than a platform for major announcements, with analysts forecasting a cut to growth projections and fresh pressure on the country's debt trajectory.

The statement lands at a moment of marked deterioration in the economic backdrop. February's Budget assumed growth of 1.6% for the year. The International Monetary Fund now expects the economy to expand by just 1%, according to Deloitte Africa economist Masego Ntsoane and separate reporting. The IMF has pencilled in 1.3% growth for 2027. South Africa's GDP contracted 0.2% year-on-year in the second quarter, and the conflict in the Middle East has added to the pressure.

"Treasury is expected to cut its growth forecasts for the mid-term," Ntsoane said, citing the weaker global environment that has shifted "significantly" since February. "On the debt issue, debt could take longer to stabilise and they may not be much relief for households in the medium-term until things start to stabilise."

The economist said the biggest concern is government debt and whether the Treasury can contain borrowing while supporting growth. "The big question for the treasury is whether they still say that debt is stabilising or if that point will be pushed further out," she said.

Fuel, inflation and rates

The energy shock is central to the darker outlook. The South African news site thesouthafrican.com reported that Brent crude is above $100 a barrel, while diesel has jumped from about R17 to R33 a litre — moves it links to the US-Iran war, which broke out after the February Budget speech. Stanlib's Kevin Lings expects inflation to top 5%, according to the same report.

Monetary conditions have tightened in response. The Reserve Bank has hiked its repo rate twice, taking it to 7.25% in September — the opposite of the cuts implied in February's Budget, the report noted.

The registered South African Institute for Taxation (SAIT) expects a delay to Treasury's debt-stabilisation forecast, the report said, with higher interest rates and a weaker rand lifting debt costs and slowing growth.

The Democratic Alliance said it expects the statement to address debt stabilisation head-on. Party MP Kingsley Wakelin said the DA wants the minister to announce "a hard numerical debt to GDP fiscal rule that is legislated to provide a credible entry for spending and borrowing decisions," alongside better spending and greater accountability.

Revenue windfall

Despite the weak growth picture, some expect a healthier revenue outcome. PSG forecasts a revenue overrun of R50 billion or more, with the deficit narrowing to about 3.5% of GDP against a 3.7% target, thesouthafrican.com reported. A separate analysis cited by the outlet puts the windfall higher, at R70 billion, driven by corporate tax from gold and precious metals. PSG expects a fiscally conservative statement that could set up ratings upgrades from Moody's or S&P.

Rise Mzansi also expects a tax windfall exceeding R50 billion, describing it as a source of short-term breathing room.

"Global volatility, from US trade policy to the energy shocks in the Middle East, is driving fuel inflation; high diesel prices continue to hit local supply chains and household budgets hard," said party spokesperson Mabine Seabe. "But it won't solve the structural problems."

On taxes, SAIT describes the statement as a resilience test and does not expect any rate changes to be announced on Wednesday, the report said, noting the minister had kept his promise not to raise taxes in 2026.

The SASSA grant question

One open item is the future of social grants. Godongwana said in February that details of the "expanded" SASSA SRD grant would be revealed in the statement, according to thesouthafrican.com. The R370 grant is funded until 31 March 2027, and its regulations are before the courts. Estimates on expanding the grant to Basic Income Support could cost the National Treasury roughly R90 billion a year, the report said.

The IFP's Nhlanhla Hadebe said his party expects a statement that balances fiscal responsibility with urgent social needs, including increased expenditure on combating gender-based violence and femicide.

ActionSA MP Alan Beesley called for "bold reforms to get the economy going to address the unemployment crisis," a concrete plan on illicit trade, increased funding for SARS and action on record fuel prices "having a devastating impact on all South Africans."

The MKP's Kwenzokuhle Madlala wants clarity on how investment will be prioritised to create employment and grow GDP, while the ACDP's Steve Swart said the statement comes at a crucial time, with the country confronted by global increases in crude oil prices, high unemployment and crime.

The Presidency has confirmed that President Cyril Ramaphosa will attend the address, which sets the fiscal framework for the coming national budget.