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For the first time in 17 years, South African government debt will stabilise and will continue to fall in the coming years, Finance Minister Enoch Godongwana declared during his 2026 Budget speech in Cape Town on Wednesday.<\/p>\n
\u201cThe budget deficit has narrowed significantly, and debt-service costs are also falling,\u201d he said.<\/p>\n
Read: Small victories, big message: SA\u2019s fiscal fortunes are shifting<\/p>\n
Godongwana said this is in stark contrast to five years ago, around the time when the Covid-19 pandemic hit.<\/p>\n
\u201cState capture had hollowed out critical institutions and weakened state owned entities. SA had been downgraded to junk status by the last of the three major credit rating agencies in 2020,\u201d he noted.<\/p>\n
\n\u201cThe warning lights were flashing. Public finances were under severe strain and growth had stalled, he added.<\/p>\n<\/blockquote>\n
\u201cFaced with this crisis, we chose not to be defined by it. Instead, we turned it into a catalyst for change. We committed to a clear reform agenda and a disciplined fiscal strategy built on three principles: stabilise debt, invest in infrastructure and spend better. Today, that commitment has delivered tangible results,\u201d said Godongwana.<\/p>\n
Turning point<\/strong><\/p>\n
The 2026 Budget Review (tabled with the national budget on Wednesday) declares upfront that SA is at \u201ca fiscal turning point in a resilient economy\u201d.<\/p>\n
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Amid the more upbeat economic mood for SA, also express by economists like Adrian Saville of Gibs and Standard Bank\u2019s Goollam Ballim, National Treasury Director-General Duncan Pieterse comments in the Budget Review forward: \u201cDetermined action has put the country\u2019s public finances on a sustainable footing, enhancing fiscal credibility.\u201d<\/p>\n
He reiterates that the 2026 Budget marks an important turning point for SA.<\/p>\n
\u201cThe outlook for economic growth is improving as reforms gather pace. Our public finances are emerging from the fiscal wilderness. A nascent confidence is reflected in our investment and borrowing environment,\u201d writes Pieterse.<\/p>\n
\n\u201cConsistent fiscal discipline, along with government\u2019s decision to reduce the inflation target, has improved investor perceptions and narrowed the risk premium investors attach to South Africa,\u201d he adds.<\/p>\n<\/blockquote>\n
National Treasury is now forecasting SA\u2019s real GDP growth over the medium term (next 3 years) to average 1.8%, with inflation expectations expected to shift lower in line with the 3% target.<\/p>\n
\u201cThis budget signals a major shift in the effort to fix local government,\u201d says Pieterse.<\/p>\n
Public debt<\/strong><\/p>\n
He says that the long stretch of rising public debt that began in the wake of the 2008 global financial crisis imposed significant costs on SA, consuming enormous resources.<\/p>\n
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\n\u201cThat period of rising debt has come to an end,\u201d declares Pieterse.<\/p>\n<\/blockquote>\n
\u201cIn line with the commitment made by the National Treasury three years ago, public debt stabilises as a percentage of GDP in the current year and is reduced over the medium term.<\/p>\n
With the fiscal strategy on course, government has withdrawn tax increases it had pencilled in for this budget and proposes inflationary relief for taxpayers to support the recovery,\u201d he says.<\/p>\n
\u201cThe combined benefits of this approach are evident in the decline in government\u2019s borrowing costs and a more favourable environment for private investment,\u201d he adds.<\/p>\n
\u201cThe opportunity before us is to use these foundations as a launch pad for faster, job-creating economic growth. There is broad agreement in the government of national unity on this transition to a higher-growth economy through targeted reforms and investments,\u201d he says.<\/p>\n
Fiscal position<\/strong><\/p>\n
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- Consolidated budget deficit: 4% of GDP for 2026, but expected to narrow to 3.1% by 2028\/29. (However, the target in the 2025 MTBPS was 2.9% by 2028\/29).<\/li>\n
- Total debt to GDP: Down to 77.3% in 2026\/27 from 79.8% for 2025.<\/li>\n
- Primary surplus: 0.9% of GDP.<\/li>\n<\/ul>\n
Godongwana and Pieterse stressed on Wednesday that the series of reforms underway to mobilise private investment and accelerate public-sector delivery is gaining traction.<\/p>\n
\u201cGovernment\u2019s own capital spending over the medium term grows at nearly 10% a year,\u201d says the DG.<\/p>\n
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