Finance Minister Enoch Godongwana tabled the Medium Term Budget Policy Statement (MTBPS) on Wednesday, outlining government’s updated economic outlook, spending plans and fiscal priorities for the next three years.
The MTBPS is the country’s mid-year budget update and shapes the direction of the national budget to be delivered in February 2026.
According to the Minister’s full speech, the statement sets out revised growth forecasts, a new inflation target and a detailed plan to stabilise public finances while increasing investment in infrastructure .
Below is a simplified breakdown of the key takeaways.
1. New inflation target announced
Government has officially lowered South Africa’s inflation target.
The new target is 3%, with a flexibility band between 2% and 4%, replacing the long-standing 3% to 6% range.
The Reserve Bank will shift toward the new target over the next two years. Godongwana said a lower target should gradually reduce borrowing costs and support household spending.
2. Economy expected to grow slightly faster
South Africa expects real GDP growth of 1.2% in 2025, more than double the 2024 rate.
Growth is forecast to average 1.8% between 2026 and 2028, supported by reforms in electricity, logistics, water infrastructure and visa modernisation.
3. Debt stabilising for the first time since 2008
Government debt is expected to stabilise at 77.9% of GDP in 2025/26.
This is the first time since the global financial crisis that debt will stop rising relative to the size of the economy.
The budget deficit is projected to fall from 4.5% of GDP to 2.7% by 2028/29.
A primary surplus of R68.5 billion is expected this year, growing to R224 billion in three years.
4. Revenue is higher than expected
Government collected R19.7 billion more in tax revenue than budgeted.
Most of this comes from stronger VAT collections and improvements in corporate and dividend taxes.
Treasury will continue monitoring SARS’s revenue performance before confirming whether planned tax increases for 2026 will be withdrawn.
5. Crackdown on illicit trade
SARS and the Financial Intelligence Centre have intensified efforts against illegal tobacco, alcohol and fuel markets.
Government estimates it has lost around R40 billion to the illicit cigarette trade since 2020.
6. Extra spending for 2025/26
Treasury has approved an additional R15.8 billion in spending this year.
This includes:
- R2 billion to rebuild Parliament
- R1 billion for the 2026 municipal elections
- Funding for health, education and the National Dialogue programme
7. Big push on infrastructure
Infrastructure remains the centrepiece of government’s economic strategy.
Capital spending is now the fastest-growing budget item, averaging 7.5% over the medium term.
Key commitments include:
- A new R15 billion infrastructure bond
- R4.1 billion for flood disaster repairs
- New PPP rules to speed up private-sector involvement
- Investment in rail corridors, including new freight and passenger systems
8. Water, electricity and logistics reforms continue
Government says it has avoided a deepening energy crisis through interventions under Operation Vulindlela.
Progress includes:
- Over 2,220MW of new solar, wind and battery projects in development
- Improved port operations with vessel waiting times down 75%
- Eleven private freight operators now using the national rail network
Water reforms are also underway, with the Water Services Amendment Bill clarifying institutional roles and the National Water Resources Infrastructure Agency launching in April 2026.
9. Support for municipalities
Municipal allocations will increase to 9.7% of nationally raised revenue.
Government plans to shift infrastructure delivery to national agencies in municipalities that repeatedly fail to spend grants.
10. Fighting corruption, ghost workers and payroll fraud
Treasury has launched a national Procurement Payments Dashboard to track government spending in real time.
Around 9,000 high-risk cases linked to possible ghost workers have been flagged for verification.
The Early Retirement Programme begins next month and is expected to save R3.5 billion annually .
Godongwana concluded by saying the MTBPS signals government’s commitment to “growth, stability and reform” as South Africa prepares to hand over the G20 Presidency in late November.
