South Africa is banking on tighter spending controls and stronger tax collections to protect its public finances as a weaker economic outlook puts renewed pressure on government’s growth ambitions.
Finance Minister Enoch Godongwana announced the revised outlook while presenting the Midterm Budget Policy Statement in Parliament, revealing that economic growth is now expected to reach 1.2% in 2026, compared with the 1.6% forecast in February.
National Treasury expects the economy to gain momentum gradually, with growth projected at 1.6% in 2027 and 2% by 2029.
Despite the downgrade, government says improved revenue collection and targeted savings have provided additional room to support essential services and economic priorities.
The South African Revenue Service has collected an additional R17.1 billion against the February estimate, largely benefiting from higher commodity prices that boosted corporate tax, dividends tax and value-added tax (VAT) receipts.
However, Treasury cautioned that the revenue windfall linked to elevated gold and platinum group metal prices is unlikely to provide a lasting source of fiscal relief.
Government has also identified R38 billion in targeted savings over the medium term, which it intends to redirect towards social and economic priorities.
The measures come as authorities seek to contain borrowing costs and stabilise public debt. Government debt is projected to stabilise at 78.4% of gross domestic product in the 2025/26 financial year, while the budget deficit is expected to narrow to 4.3% of GDP in 2026.
Godongwana said the improvement in the country’s fiscal position reflected efforts to maintain discipline in public spending and strengthen macroeconomic stability.
Government is also pursuing proposed fiscal anchor legislation intended to strengthen accountability for public finances. The legislation is expected to be tabled in Parliament in 2027 following a public consultation process.
Meanwhile, consolidated government spending is projected to reach R2.43 trillion in the 2026/27 financial year. Funding priorities include support for the Madlanga, Khampepe and Nkabinde commissions of inquiry.
Motorists and other consumers are also expected to receive temporary relief through fuel levy measures extending to January 2027.
While the latest figures point to an improvement in government’s finances, the lower growth forecast highlights the challenge of sustaining economic expansion while managing debt and meeting public spending commitments.