Fiscal progress is encouraging, but growth and delivery remain the test

Growth outlook: A recovery slower than expected

South Africa’s economic growth outlook has weakened, with real gross domestic product (GDP) growth forecast at 1.2% in 2026, down from the 1.6% projected in February during the annual National Budget Speech. The minister suggested, however, that growth is expected to recover gradually to 1.6% in 2027 and 2% by 2029. Fiscal discipline and a lower inflation target are helping to contain borrowing costs and reduce the country’s risk premium, while the rand has strengthened and become less volatile. The accelerated implementation of structural reforms, stronger state capability and increased infrastructure delivery could lift economic growth above 3% per year.

Sustaining the gains of fiscal consolidation

The consolidated budget deficit for 2026/27 is projected at 3.9% of GDP, marginally better than the 4.0% estimated in February. Gross government debt is estimated at 78.4% of GDP for 2025/26, compared with the earlier projection of 78.9%.

Together, these adjustments indicate some improvement in the fiscal position and provide a more stable base for medium-term planning. The sustainability of consolidation will depend on keeping debt-service pressures in check without weakening the public investment and institutional capability needed to lift growth.

Revenue and taxes: A positive step, but not a long-term solution

The 2026/27 gross tax revenue estimate has been revised upwards by R17.1 billion relative to the February National Budget, largely due to higher commodity prices. Revenue is projected to increase from R2.14 trillion in 2026/27 to R2.53 trillion by 2029/30, although the commodity-related gains are expected to dissipate over the medium term.

SARS will continue strengthening revenue administration and compliance while intensifying efforts to combat illicit trade, particularly in alcohol and tobacco. This will include modernising customs and excise systems, expanding cargo-scanning and track-and-trace capabilities and strengthening frontline enforcement.

This supports the fiscal outlook and reduces immediate pressure to seek additional revenue from taxpayers. The priority should remain effective tax administration, improved compliance and action against illicit trade – alongside reforms that encourage new investment and employment. A broader and more resilient tax base will be more valuable in the long term than temporary revenue improvements.

The minister is proposing a further allocation of budget to SARS for modernisation. In February, the Minister of Finance projected a collection gap of R20 billion which would need to be closed through taxes or additional borrowing if the collections were subdued, that this is negated by the better-than-expected revenue collections emanating from high commodity prices. Therefore, no additional taxes are anticipated in the National February Budget Speech.

The above notwithstanding that a tax on online gambling seems to be at an advanced formulation stage and likely to be firmed up in February (behavioural tax). 

Accelerating infrastructure delivery and private investment

Government is prioritising productive infrastructure investment to expand economic capacity and improve service delivery. The Infrastructure Finance and Implementation Support Agency (IFISA) is supporting projects worth more than R217 billion, while 68 projects, including 31 municipal projects, are in the public-private partnership pipeline.

Fiscal support approved through the Budget Facility for Infrastructure exceeds R100 billion, complemented by more than R14 billion raised through the infrastructure bond and a further R20 billion earmarked for projects under evaluation. Following a review of infrastructure conditional grants, through which R887 billion was transferred to provinces and municipalities between 2017/18 and 2023/24, government will reform the grant system to strengthen project planning, implementation, maintenance, oversight and accountability.

The growing emphasis on public-private partnerships (PPPs) is encouraging, particularly in addressing electricity, water and municipal infrastructure challenges. However, the success of these initiatives will depend on effective implementation, stronger accountability and the timely completion of projects. As noted in the previous budget speech, PPPs provide a viable alternative for public entities to undertake projects, even in an ongoing fiscally constrained environment.

Household expenses: Temporary relief amid ongoing financial pressures

The government will introduce temporary reductions in fuel levies to help alleviate rising cost pressures on households and businesses. From 4 November to 1 December 2026, the levy will be reduced by R3 per litre for diesel and R1.50 per litre for petrol. After this period, the reduced rates will continue until 5 January 2027, with cuts of R1.50 per litre for diesel and R1 per litre for petrol. This initiative is expected to cost an estimated R10 billion in lost revenue – but was generally well-received among political commentators following the speech.

These announced reductions offer short-term relief to motorists and businesses during a time when transport costs have increased pressure on household budgets. However, while this type of relief can help address immediate challenges, it cannot replace the structural changes needed to manage costs sustainably over the long term.

Gender-Based Violence: Funding must strengthen the response

The MTBPS highlights the funding allocated for addressing gender-based violence and femicide. The government has designated R3.8 billion to hire over 3,500 social workers, aiming to enhance prevention and response services. Additionally, R186 million is allocated to improve forensic and investigative capabilities. By the fiscal year 2028/29, the number of sexual offenses courts will increase from 55 to 101, and the Thuthuzela Care Centres will expand from 72 to 80. Moreover, R157.4 million will be used to support better national coordination and oversight of the government's response to gender-based violence and femicide.

Like other spending priorities mentioned by the minister, these allocations should be tied to measurable outcomes, clearly defined institutional responsibilities and transparent reporting. Effectively addressing gender-based violence necessitates consistent efforts rather than one-off financial commitments.