For the teachers, doctors and nurses whose salaries depend on the state’s ability to pay them, and for the vulnerable households that rely on the social wage, the message from Parliament this week carried a note of cautious reassurance. Finance Minister Enoch Godongwana, delivering the Medium-Term Budget Policy Statement on Wednesday, told lawmakers that the government’s commitment to economic progress is beginning to bear fruit, and that the difficult choices of recent years are starting to protect the services ordinary South Africans depend on.
The country has spent the past few years on the back foot, battered by state capture, the COVID-19 pandemic, low growth, rising expenditure and mounting debt. Godongwana acknowledged that the damage demanded a change of course. “Government committed itself to move away from fiscal fragility towards one of stable, credible and sustainable public finances,” he said. That meant limiting bailouts of state-owned entities, funding new commitments responsibly, and prioritising investment over unsustainable consumption.
He was candid about what those choices meant in practice. “Before this very house, we were honest about the choices before us. We made it clear that government could not fund every demand at once without risking the country’s fiscal future. Today, that commitment is beginning to pay off.”
For frontline workers, the payoff comes as protected services. The fiscal space created through disciplined budgeting, the Minister explained, allows government to preserve the jobs of teachers, doctors and nurses while shielding the social wage for the most vulnerable. Debt, meanwhile, has been addressed and is now stabilised in the 2025/26 financial year. Debt as a percentage of gross domestic product is falling, creating a stronger foundation for investment, growth and job creation. Earlier this year, all three major global credit rating agencies announced positive rating actions on South Africa, despite a challenging global environment.
The outlook, however, remains difficult, and the risks are 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. Activity has already lost momentum, especially in export-linked sectors. Government now forecasts real economic growth of 1.2% in 2026, down from the 1.6% projected in February. Growth is expected to recover to 1.6% in 2027 and reach 2% by 2029.
Even so, the economy has shown resilience, backed by fiscal discipline and a lower inflation target that has helped contain borrowing costs and reduce South Africa’s risk premium. The Rand has strengthened and become less volatile, something Godongwana attributed to the difficult choices made to preserve macroeconomic stability and fiscal sustainability. He was quick to concede, though, that growth remains too low.
To change that, sharp focus is being placed on implementing structural reforms, strengthening state capability and delivering public infrastructure. “This will put the economy on a faster, more sustainable growth trajectory. If we stay the course, growth could exceed 3% per annum,” the Minister stated.
The fiscal strategy underpinning these efforts rests on four main pillars: supporting growth through prudent fiscal policy and increased capital investment alongside structural reforms; improving value for money by driving efficiencies, reducing waste and prioritising spending that delivers results, including growth-enhancing public infrastructure investment; reducing debt-service costs while managing the debt burden responsibly; and embedding fiscal sustainability through a principle-based fiscal anchor.
The results, Godongwana argued, are already visible. For the first time in nearly two decades, the debt-to-GDP ratio has stabilised at 78.4% of GDP in 2025/26. The primary surplus, where government revenue exceeds non-interest spending, continues to grow, rising from 1.7% of GDP this year to nearly 3% by 2030. That will allow government to reduce borrowing, contain debt-service costs and create more space for growth-enhancing investment and essential public services. The budget deficit is also better than expected, narrowing to 4.3% of GDP this year compared with the 4.5% forecast at the time of the Budget, and falling to 2.5% of GDP by 2030.
To safeguard these advances, government released draft fiscal anchor legislation for public comment in October, with the expectation that it will be tabled in Parliament next year. The proposed legislation sets out fiscal sustainability as a standard within the Public Finance Management Act rather than a rigid numerical rule. It requires each administration, following every general election, to commit to its own fiscal objectives consistent with the electoral mandate, then report against them at every Budget and explain any material deviation to Parliament. “Fiscal sustainability cannot depend on the commitments of a single administration,” the Minister said. The Financial and Fiscal Commission will independently report on the consistency of the fiscal framework with the administration’s fiscal plan.
The National Treasury describes fiscal sustainability as the ability of the state, under reasonable macroeconomic and fiscal assumptions, to meet its present and future expenditure and debt-service obligations and manage its fiscal risks without undermining macroeconomic stability or requiring an unrealistically large or abrupt future correction to revenue or expenditure. For Godongwana, the approach preserves flexibility in changing economic conditions while strengthening transparency, accountability and fiscal discipline. Most importantly, he said, it helps ensure that developmental priorities and constitutional obligations are pursued at a pace that public finances can sustain. “That is how we protect our economic future and our constitutional commitments.”
Whether the growth trajectory holds, and whether the anchor legislation survives its journey through Parliament next year, will determine what these promises mean for the classrooms, clinics and households that depend on them. Further background on the economy’s performance is available at https://www.sanews.gov.za/south-africa/south-african-economy-shows-resilience-despite-global-shocks.