Finance Minister Enoch Godongwana delivered a surprisingly upbeat medium-term budget policy statement (MTBPS) on Wednesday, signaling a potential turnaround for the South African economy. The key takeaway? Revenue is expected to exceed expectations by a significant R19.7 billion, indicating a slow but steady recovery.
Optimism Tempered with Caution
Addressing Parliament, Godongwana expressed cautious optimism, stating, "As we table this policy statement, we have reason to be optimistic about the future of our country," while simultaneously urging against complacency. This optimism stems, in part, from the smoother passage of the medium-term budget compared to earlier challenges faced with the main budget, which was delayed due to opposition within the government of national unity. The initial budget drama even forced Godongwana to abandon a planned VAT increase.
Promises Kept, Progress Made
Godongwana emphasized the government's commitment to its promises: faster economic growth, stronger public finances, and improved living standards for all South Africans. He highlighted the achievement of stabilising public debt and the removal of South Africa from the Financial Action Task Force (FATF) grey list as key successes. The FATF, a Paris-based international financial crimes watchdog, had grey-listed South Africa in 2023 due to shortcomings in its anti-money laundering and counter-terrorism financing systems. Godongwana credited collaboration across government departments, law enforcement agencies, and the private sector for the swift delisting.
- Revenue expected to exceed expectations by R19.7 billion.
- Real GDP growth forecast at 1.2% for this year.
- Real GDP growth will average 1.8% between 2026 and 2028.
- Lower inflation target for South Africa of 3%.
The Minister also projected real GDP growth of 1.2% for the current year, more than doubling the expansion seen in 2024, with further moderate strengthening anticipated over the medium term. "We now forecast real GDP growth will average 1.8 per cent between 2026 and 2028," he stated. He also announced a lower inflation target for South Africa of 3%.