South Africans stand to see the rewards of a hard-won fiscal turnaround, according to the Medium-Term Budget Policy Statement presented this week by the National Treasury. For households and communities that depend on public services, the statement carries a direct message: the money government has clawed back through discipline is now being redirected toward infrastructure, relief from high fuel prices, drought support and frontline services.
The debt-to-GDP ratio has stabilised at 78.4%, slightly lower than promised. Three years ago, Treasury committed to stabilising debt as a share of the economy in the 2025/26 financial year by running a growing primary surplus, meaning revenue exceeds spending excluding interest by a widening margin. That target has now been met, despite the Middle East conflict that began in February and the global oil price shock that followed. Primary surpluses have been achieved for three consecutive years, with the trend set to continue over the next three, reducing the debt ratio and slowing growth in debt costs over the coming decade.
The benefits reach beyond the ledger. As confidence in the management of public finances has grown, the risk premium investors attach to South Africa has fallen, containing the country’s cost of borrowing even as global inflation has risen and borrowing costs have ballooned, particularly for over-indebted advanced economies such as the United States and France. That has helped the domestic economy remain relatively resilient in a difficult year. Growth of 1.2% is expected this year, below the 1.6% forecast in February but above last year’s 1.1%. Emerging market economies, by contrast, are expected to grow 0.8 percentage points less than last year.
With fiscal targets on track, government has gained space to spend on social and economic priorities. Revenue is expected to come in well above expectations, helped by high gold and platinum prices that produced a R23.9 billion overrun in gross tax and mining-related revenues. Of the R45 billion in additional spending proposed for the current year, R20 billion is set aside for critical infrastructure to boost growth. Some of the extra revenue will provide further temporary relief from the fuel levy, cushioning households and businesses from high global oil prices, and fund drought relief. Spending grows by 3.6% over the medium term, to more than R3 trillion in 2029/30.
Service delivery sits at the heart of the spending plans. This year will see further modernisation of the SA Revenue Service to lower the cost of tax compliance, and improved capacity at the Border Management Authority. Over the medium term, funding is provided for 3 500 additional social workers to support victims of violence against women, to bolster frontline health and education services in the provinces, and to help municipalities meet the costs of free basic services such as electricity and water.
The statement is candid that public money is not yet delivering its full potential. Meeting fiscal targets means doing more with less, and improving the quality and impact of spending across all levels of government is a particular focus. Government has identified R38.1 billion in savings, on top of last year’s R12 billion, by closing programmes that are not fit for purpose, cutting administrative expenses and duplication, and reducing fraud in social grants.
Local government receives pointed attention, given the financial distress in many municipalities that has undermined delivery of basic services such as water, electricity and sanitation. For the first time, direct allocations to local government have reached just over 10% of available spending. The message to municipalities is that they have the funding and now must deliver. Support will help them collect revenue from services and invest in essential infrastructure, but more conditions are being attached, with active intervention against non-compliance and mismanagement. Proposed amendments to municipal finance legislation will ensure funded budgets, allow earlier intervention in financial distress and give treasuries a role in appointing CFOs.
Building state capacity, including locally, is described as essential to drive growth, investment and job creation, alongside macroeconomic stability, infrastructure investment and structural reforms. Capital spending grows at 5.3% annually over the medium term, faster than average spending growth. The warning from history is clear: between 2009 and 2023 public debt tripled and interest payments consumed a growing share of public resources. To safeguard the turnaround, legislation to entrench fiscal discipline will be tabled in 2027. The gains, in lower borrowing costs and space to invest in priority needs, depend on maintaining the quality and integrity of spending at every level of government.
Pieterse is director-general of the National Treasury.