South Africa’s 2026 Medium Term Budget Policy Statement

Laying a New Foundation for Growth and Development

Despite global volatility, South Africa is weathering the storm much better than its peers.

The finance minister, Enoch Godongwana, declared this in the 2026 Medium Term Budget Policy Statement (MTBPS) speech in parliament.

The minister added that South Africa’s ability to weather the global storm is due to consistently taking hard decisions over the last five years. That have built our fiscal buffers and fortified our resilience.

“We can bounce back better and faster,” he said.

According to Godongwana. The MTBPS “recommits government to responsible stewardship of public resources, to creating the conditions for faster and more inclusive growth, and to building a state capable of delivering on the aspirations of all South Africans.”

He highlighted that debt as a percentage of GDP is now falling, creating a stronger foundation for investment, growth and job creation.

“The fiscal space created through disciplined budgeting allows us to protect frontline services, preserve the jobs of teachers, doctors and nurses, while protecting the social wage for the most vulnerable,” he said.

Godongwana emphasised that the 2026 MTBPS “proposes a new set of fiscal guardrails to strengthen discipline, improve accountability and support responsible budgeting into the future.”

The strategy for faster growth and healthier public finances remains anchored on four pillars including maintaining macroeconomic stability; implementing structural reforms; building state capability; and supporting growth-enhancing infrastructure.

The minister pointed out that the pillars are removing constraints to growth, crowding in private investment and improving the state’s ability to deliver.

“They are also helping South Africa navigate a difficult global environment while responding to domestic priorities,” he said.

ECONOMIC OUTLOOK

Global Outlook

Godongwana confirmed that the global environment has deteriorated since the beginning of the year.

Referring to attacks by Israel and the United States on Iran earlier in the year, the minister highlighted that the conflict led to the closing of the Strait of Hormuz, a vital corridor connecting oil suppliers in the Middle East to the world.

“The interruptions to global oil supply have caused prices to rise sharply, particularly food and energy prices. Borrowing costs including for South Africa have also increased,” he said.

Global growth is now estimated at 3.1 per cent in 2026. Down from 3.3 per cent projected in January.

Consequently, the outlook for both growth and inflation has weakened.

Domestic Outlook

On the domestic front, risks remain elevated.

“A prolonged conflict in the Middle East, alongside El Niño and its likely impact on producer costs and output, could further weaken domestic growth,” he asserted.

Domestic economic activity has already lost some momentum, especially in export-linked sectors.

National treasury is now forecasting real economic growth of 1.2 per cent in 2026, down from the 1.6 per cent projected in February.

Growth is expected to reach 1.6 per cent in 2027, and 2 per cent by 2029.

The minister indicated that fiscal discipline and a lower inflation target are helping to contain borrowing costs and reduce South Africa’s risk premium.

Despite the rand strengthening and becoming less volatile, Godongwana pointed out that growth remains too low.

“For this reason, government is focused on accelerating implementation of structural reforms coupled with strengthening state capability and delivering public infrastructure,” he said.

“If we stay the course, growth could exceed 3 per cent per annum,” the minister declared.

FISCAL FRAMEWORK

According to Godongwana, South Africa’s fiscal strategy rests on four principles including supporting growth through prudent fiscal policy and increased capital investment; improving value for money by driving efficiencies, reducing waste and prioritising spending that delivers results; reducing debt-service costs while managing debt burden responsibly; and embedding fiscal sustainability through a principle-based fiscal anchor.

For the first time in nearly two decades, South Africa’s debt-to-GDP stabilised, at 78.4 per cent of GDP in 2025/26.

Gondongwana highlighted that the primary surplus, where government revenue exceeds non-interest spending, also continues to grow.

The primary surplus will increase from 1.7 per cent of GDP this year to nearly 3 per cent by 2030.

“This will allow us to reduce borrowing, contain debt-service costs and create more space for growth-enhancing investment and essential public services,” he said.

The budget deficit will also narrow to 3.9 per cent of GDP this year compared to the 4.0 per cent forecast at the time of the Budget.

“By 2030, we see the deficit falling to 2.5 per cent of GDP,” Godongwana declared.

REVENUE

Godongwana informed parliament that the revenue outlook for 2026/27 is stronger than expected, due to higher collections from corporate tax, dividends tax and VAT.

Consequently, gross tax revenue for this year was revised upwards by R17.1 billion compared with the February estimate.

“A large portion of this improvement is due to higher commodity prices and these gains are expected to dissipate over the medium term,” he said.

Overall, gross tax revenue is projected to increase from R2.14 trillion this year to R2.53 trillion in 2029/30.

Godongwana announced that, to provide temporary relief, the fuel levy will be reduced by R3 per litre for diesel and R1.50 per litre for petrol from 4 November 2026 up until 1 December 2026.

Thereafter, the relief will continue at a lower amount until 5 January 2027.

The diesel levy will be reduced by R1.50 per litre and the petrol levy by R1 per litre.

The minister pointed out that the measures will provide R10 billion in support, at a fiscal cost of R10 billion in foregone revenue.

“To fund this relief, the R10 billion that was transferred to the Central Energy Fund will be returned to the National Revenue Fund and put into the Contingency Reserve,” he said.

EXPENDITURE

The additional revenue in 2026/27 means that treasury can increase expenditure by R45.5 billion compared to what was outlined in February.

Together with allocations from the contingency reserve, the Adjustments Appropriation Bill includes:

• 2 billion for unforeseeable and unavoidable expenditure, mostly for disaster relief and rehabilitation;
• 9 billion rolled over from the previous financial year;
• 3 billion in self-financing expenditure;
• R823 million for the South African Defence Force for the deployment of troops to assist the police to fight gang related crimes and to combat illegal mining; and
• R516 million for the Madlanga, Khampepe and Nkabinde Commissions of Inquiry.

A Special Appropriation Bill includes allocations to parliament and for the continued provision of health care services to retired members of the South African National Defence Force.

Funds are also provided to capacitate the Border Management Authority and to SARS to speed up its modernisation programme.

Spending will also enhance SARS’ ICT infrastructure in order to strengthen the availability of its system and cyber resilience.

Other adjustments include R150 million allocated towards enhancing the technical capabilities of the digital services unit to lead the development of the MyMzansi app, which will allow citizens to access government services through a single digital platform; contingency reserve increases to R10 billion to respond to the potential threats associated with El Niño and other risks; and R20 billion earmarked for infrastructure projects currently in evaluation in the budget facility for infrastructure.

In-year adjustments also provide for early retirement and voluntary exit packages from the public service.

“This will rejuvenate the public service and save an average of R4.4 billion a year to address the pressures in the compensation of public sector employees,” said the minister.

Consolidated government expenditure increases at 3.6 per cent per year. From R2.7 trillion to R3 trillion by 2029/30.

Payments for capital assets are the fastest growing item in the budget. At 5.3 per cent a year.

An additional R1.5 billion is allocated over the next three years for additional extension officers in the agricultural sector. They will continue to provide crucial support to farming communities.

Godongwana also announced that R3.8 billion will be allocated to hire more than 3,500 social workers specifically to strengthen prevention in response to rising murders and attacks on women. And R186 million will be allocated to forensic and investigative capacity.

Other allocations include recapitalising the South African Police Service fleet. At a cost of R810 million next year. And R2.2 billion over the medium term to enhance the independence of the judiciary.

DIVISION OF REVENUE

Over the medium term. National departments will receive 47.4 per cent of available non-interest spending. Provinces 42.6 per cent, and local government 10 per cent.

An additional R21.8 billion will be allocated to the local government equitable share. To cover the higher bulk costs of free basic water, sanitation, electricity and refuse removal.

The general fuel levy allocation will also increase by R13.4 billion. Restoring the metros’ share to 23 per cent over the medium term.

Treasury is also adding R20.5 billion to the provincial equitable share. To help provinces meet higher costs in health and education.

R3.5 billion will be added over the MTEF for an even wider rollout of smart meters.

IN THE PIPELINE

According to Godongwana. A major milestone was reached. With the submission of the amended Municipal Public-Private Partnership Regulations to Parliament for the required 30-day scrutiny period.

This is the final step before implementation.

“The new regulations will simplify processes, reduce transaction costs and make it easier for municipalities to partner with the private sector. So to deliver infrastructure and services,” he said.

A review of infrastructure grants to provinces and municipalities has been completed.

Between 2017/18 and 2023/24, the national government transferred R887 billion through infrastructure conditional grants.

The review found that while most funds are spent, projects are often delayed, incomplete or fail to deliver the intended benefits.

“We are therefore reforming the infrastructure grant system to strengthen planning, accountability and oversight,” Godongwana said.

Progress has been made in establishing the Credit Guarantee Vehicle (CGV). A crucial instrument to mobilise private capital for infrastructure investment.

The CGV was incorporated in August 2026 and has applied to the Prudential Authority for an insurance license.

Development partners including the World Bank have provided conditional commitments of US$553 million towards its capitalisation.

The plan is for the CGV to be operational by 2027.

The government released draft fiscal anchor legislation for public comment in October.

The proposed legislation is expected to be tabled in parliament in 2027.

Godongwana also announced that a more detailed update on the National Illicit Economy Disruption Programme will be provided in the Budget next year.

The Unclaimed Financial Assets Centralisation Framework was published for public comment on 20 August.

Further technical work on the institutional, legal, and operational arrangements required to support a phased implementation of the framework will be undertaken.

Draft legislative amendments will be drawn up in 2027.

A discussion paper proposing a National Online Gambling Tax was published last year.

Consultations are ongoing on the proposed tax design. Its linkages to the existing regulatory framework and the implications for provinces and the currently regulated market.

The final design will be announced in the February 2027 Budget.

In terms of draft capital flow management regulations that focus on the cross-border treatment of crypto assets.  Godongwana pointed out that consultations will get underway to publish a revised second draft of the regulations for further input.