Work is progressing well on the proposed lower inflation target, finance minister Enoch Godongwana said during the National Treasury budget vote on Tuesday but he warned against haste in doing so.
Reserve Bank governor Lesetja Kganyago is keen to lower the inflation target to 3% from the 3%-6% range with a midpoint objective of 4.5%. He argues that a lower inflation target would anchor inflation expectations and lock in lower interest rates.
Godongwana said that all agreed that lower inflation was good for the economy, but cautioned that lowering the target “should not be taken in haste without the necessary technical and political engagements that achieves a genuine consensus grounded in a thorough consideration of the social and economic realities”.
The finance minister decides on the inflation targeting policy in consultation with the Reserve Bank, which implements it independently.
Budget process review
Godongwana confirmed that a comprehensive review of the budget process had been completed, after the debacle which saw the Treasury tabling three budgets in the National Assembly this year, the first two being rejected because of their proposed hike in the politically unpopular VAT rate.
“Clearly, over the midterm all of us realise that there is a substantial need to do a review of the budget process. That review has resulted in actionable reform proposals of which short term changes will be implemented in the 2026 budget process,” the minister said. “The changes include cabinet approval of a budget guidelines to strengthen the technical and political interface.”
The guidelines will be presented to the cabinet meeting on July 25.
Also in the pipeline are draft regulations of the implementation of the Public Procurement Act which will be ready for intergovernment consultation at the end of August and promulgation during the 2025/26 financial year.
Another General Laws (Anti-Money-laundering and Combating Terrorism) Bill is being finalised for a further round of public comment and tabling in parliament in the third quarter of 2025. The aim is to further strengthen SA’s ability to combat money-laundering and terrorism financing. SA’s progress in this regard has led to the likelihood of the country’s greylisting by the Financial Action Task Force (FATF) being lifted in October.
The minister emphasised the need to achieve greater efficiency in government spending.
Since 2013, 276 spending reviews had been completed and Godongwana said he would seek the commitment of cabinet ministers for the implementation of their outstanding recommendations. This would include the rationalisation of the 37 public employment and labour activation programmes across 16 departments.
Ghost workers
New reviews would also be undertaken into ghost workers and infrastructure conditional grants. An audit of ghost workers would be undertaken to identify bogus and nonexistent employees and remove them from the system.
The review of the infrastructure conditional grants would be undertaken to assess why provinces and municipalities underspent, why projects were not delivered on time and within budget and why the quality of the deliverables was poor in some circumstances.
Godongwana said the National Treasury also planned a review of the remuneration of executives and board members of public entities. The aim was to develop a standardised framework for specified public entities, “based on their mandates, areas of influence and the complexity of a given organisation”.
He said other reforms to policy included changes to how disaster risk was financed.
“The increasing intensity and frequency of climate change disasters in our country and the region, as we have seen in the tragic floods recently in Eastern Cape and KwaZulu-Natal, are resulting in severe economic and fiscal effects that must be mitigated through proactive forward planning and budgeting. The national disaster risk financing strategy is our response to these risks,” he said.
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