Finance Minister Enoch Godongwana delivered a surprisingly upbeat medium-term budget policy statement (MTBPS) on Wednesday, injecting a dose of optimism into South Africa's economic outlook. He announced that revenue for the current year is projected to exceed expectations by R19.7 billion, signalling a gradual recovery.
Addressing Parliament, Godongwana stated, "As we table this policy statement, we have reason to be optimistic about the future of our country," while also stressing the importance of avoiding complacency. This optimism stems, in part, from the smoother passage of the medium-term budget compared to the earlier main budget, which faced resistance from partners within the government of national unity. This earlier resistance led to the scrapping of a proposed VAT increase.
Key Highlights from the Budget Speech
- Economic Growth: Godongwana forecasts real GDP growth of 1.2% for South Africa this year, more than double the expansion in 2024. He anticipates an average growth of 1.8% between 2026 and 2028.
- Public Debt: The government remains committed to stabilising public debt and beginning to reduce it.
- Financial Action Task Force (FATF): South Africa has been removed from the FATF grey list after addressing shortcomings in its systems to counter money laundering and terrorist financing.
- Inflation Target: A lower inflation target of 3% has been announced.
Reasons for Optimism
Godongwana highlighted the progress made in fulfilling key promises: accelerating economic growth, strengthening public finances, and improving the lives of all South Africans. He credited collaboration across government departments, law enforcement agencies, and the private sector for the achievement of removing South Africa from the FATF grey list in just two and a half years.
While challenges remain, the Finance Minister's statement suggests a cautiously optimistic outlook for the South African economy, underpinned by improved revenue projections and a commitment to fiscal responsibility.