Finance Minister Enoch Godongwana delivered the 2025 Medium-Term Budget Policy Statement amid global economic uncertainty and domestic challenges. The statement sets out the government’s strategy to achieve sustainable economic growth, stabilise public finances, and enhance service
delivery. It highlights structural reforms, macroeconomic management, and state capability building as pillars to address unemployment, poverty, and inequality.
Economic Outlook
South Africa’s economic prospects are influenced by both domestic reforms and global conditions, including trade tensions and AI-driven equity market volatility.
Key Points:
- Global growth projected at 3.2% in 2025, affected by geopolitical uncertainty, trade disputes, and supply chain challenges.
- Domestic real GDP forecast at 1.2% for 2025, up from 0.6% in 2024, with medium-term growth averaging 1.8% (2026–28).
- Structural reforms in energy and logistics are critical to achieving higher growth rates.
- Maintaining macroeconomic stability
- Implementing structural reforms
- Building state capability
- Supporting growth-enhancing infrastructure
Maintaining Macroeconomic Stability
Effective macroeconomic management underpins growth, combining fiscal and monetary policy to contain inflation and borrowing costs.
Key Points:
- Inflation target revised to 3% with ±1% tolerance, replacing previous 3–6% range; implemented over two years.
- Lower inflation target expected to reduce long-term interest rates, boost household consumption and business investment.
- Short-term fiscal costs include slower nominal GDP and revenue growth; long-term benefits outweigh these.
- Reserve Bank to pursue target continuously and communicate deviations clearly.
Fiscal Outlook
Government finances are stabilising, with debt containment and efficient resource allocation
prioritised.
Key Points:
- Public debt stabilises at 77.9% of GDP in 2025/26; primary budget surplus of R68.5bn (0.9% of GDP), rising to R224bn by 2028/29.
- Budget deficit narrows from 4.5% of GDP in 2025/26 to 2.7% in 2028/29.
- Debt-service costs to grow at 3.8% annually over the MTEF, down from 7.4% projected in 2025 Budget.
- Government exploring a principles-based fiscal anchor with parliamentary oversight and transparency on fiscal risks.
Revenue Adjustments
Improved revenue performance strengthens fiscal position, allowing for limited additional expenditure.
Key Points:
- Public debt stabilises at 77.9% of GDP in 2025/26; primary budget surplus of R68.5bn (0.9% of GDP), rising to R224bn by 2028/29.
- Budget deficit narrows from 4.5% of GDP in 2025/26 to 2.7% in 2028/29.
- Debt-service costs to grow at 3.8% annually over the MTEF, down from 7.4% projected in 2025 Budget.
- Government exploring a principles-based fiscal anchor with parliamentary oversight and transparency on fiscal risks.
Infrastructure
Infrastructure investment is central to growth, leveraging public and private finance for service delivery and economic expansion.
Key Points:
- Capital expenditure to grow 7.5% over MTEF; new infrastructure bond to raise ≥R15bn.
- Public-private partnership (PPP) reforms: revised triple-P regulations, unsolicited bid guidelines, municipal PPP updates by 2026.
- Transport sector: first rail corridor request for proposals December 2025; freight and passenger transport modernisation underway.
- Water infrastructure: non-revenue water and reuse projects across municipalities; Water Partnerships Office preparing pipeline.
- Disaster relief funding R4.1bn for schools, clinics, pipelines, and substations damaged by floods.
- New Infrastructure Finance and Implementation Support Agency operational March 2026 to centralise project preparation and financing.
Medium-Term Revenue and Expenditure
Consolidated spending and revenue management balance growth priorities with social support.
Key Points:
- Consolidated spending rises from R2.6tn (2025/26) to R2.9tn (2028/29).
- 61% of non-interest spending over medium term allocated to education, health, social protection.
- Projected R15.7bn shortfall in gross revenue over next two years if economic growth and tax compliance do not improve.
Efficiency measures and elimination of waste ensure fiscal discipline and maximise value for money.
Key Points:
- Medium-term savings of R6.7bn through scaling down low-priority/underperforming programmes.
- Over half of savings derived from addressing social grant fraud and public transport grant inefficiencies.
- PRASA commuter rail revitalisation: passenger numbers increased from 11.8m (2022/23) to 116m (2024/25).
- Additional savings and efficiency updates to be provided in February Budget Review.
Implementing Structural Reforms
Structural reforms dismantle bottlenecks in energy, logistics, water, and local government.
- Operation Vulindlela Phase 2 drives reform in energy, logistics, water, spatial integration, and digital transformation.
- Energy: 2,220 MW renewable projects in development; Kusile Unit 6 adds 800 MW; loadshedding reduced.
- Logistics: 11 private train operators now have slots on 41 routes across six corridors; port efficiency improved; Durban Pier 2 expected to unlock R200bn private investment over five years.
- Water: National Water Resources Infrastructure Agency operational April 2026; Africa Water Investment Summit secured US$12bn for 80 projects, including 36 in South Africa.
- Visa backlog cleared (300,000 applications), enhancing skills, investment, and tourism inflows.
Enhancing public sector capacity improves delivery and governance across national and local levels.
Key Points:
- Municipal Infrastructure Grant reform: indirect funding via MISA/DBSA for underperforming municipalities.
- Metro trading services: R19.3bn reallocated; financial sustainability improved via billing, tariffs, and credit control.
- Public service reforms: procurement dashboard launched for transparency; 9,000 high-risk ghost workers flagged.
- Early Retirement Programme expected to save R3.5bn annually; rejuvenates workforce.
The MTBPS demonstrates South Africa’s commitment to growth, fiscal stability, and reform, leveraging infrastructure, structural reforms, and regional engagement to address unemployment and inequality.
Key Points:
- G20 presidency advanced Africa’s fiscal, institutional, and development priorities.
- Ministerial Declaration on Debt Sustainability achieved; rotational SADC chairmanship assumed post-Madagascar exit.
- Transparent budgeting, stakeholder engagement, and effective public spending remain central.