Business Unity SA (Busa), the country’s largest federation of business organisations, has commended as “robust and credible” the medium-term budget policy statement (MTBPS) that finance minister Enoch Godongwana tabled in parliament on Wednesday.
In the MTBPS, debt will peak at a slightly higher level, at 75.5% of GDP, or R6-trillion, though this will still start to decline from 2026/27.
A revenue shortfall of R22bn is expected in the current fiscal year, worse than many economists expected, with the fuel levy and import VAT undershooting targets in large part because of the end of load-shedding, which reduced Eskom’s diesel burn as well as imports of renewable energy equipment.
Godongwana also mentioned the government’s intention to implement a raft of measures, including early retirement, to curb expenditure over the medium term.
Expenditure of R11bn over the next two years has been provided for a voluntary early-retirement package for public servants 55 years and older in a bid to reduce the public-sector wage bill (which consumed 32.1% of consolidated expenditure in 2023/24) and to rejuvenate the public service.
It is assumed that about 30,000 government employees will take the package: 12,000 in the first year and 18,000 in the second year. The Treasury hopes to save R2bn each year from the initiative.
Busa CEO designate Khulekani Mathe said Godongwana’s emphasis on economic growth, underpinned by investment in infrastructure and the role of the private sector, was welcome.
“Still, this MTBPS is a stark reminder of the depths of the fiscal problems that this Treasury is seeking to recover from — symptoms of structurally low growth, a historic lack of prioritisation in expenditure by the cabinet, previously delayed reforms and very high costs of borrowing,” Mathe said.
“While there is light at the end of the tunnel, record high levels of debt-service costs as a share of revenue are a reminder that it will take some time to exit the current situation.”
He said business was encouraged by the Treasury’s efforts to prioritise fiscal consolidation and contain the risks of an unsustainable debt-to-GDP trajectory, “although the goal of stabilising debt at 75.5% remains ambitious”.
The MTBPS outlined the government’s strategy to lift the struggling economy to a “higher and more inclusive growth path”. This strategy was anchored on four pillars, which sought to build a “capable state” that delivered a reasonable and reliable standard of public service that would foster the necessary environment for more growth and jobs.
Diversify infrastructure finance and de-risk projects
A key theme of the budget was to pivot government spending towards higher investment on public infrastructure, in areas such as electricity and water, as well as to accelerate the delivery of infrastructure projects.
“The focus on infrastructure reforms to diversify infrastructure finance and de-risk projects bodes well for private sector participation in reducing the country’s infrastructure deficit — a move business has been lobbying for,” said Mathe.
He said that that decision, complemented by the soon-to-be-enacted amendments in public-private partnership (PPP) regulations, would attract key investments to fund bankable projects.
Build One SA acting spokesperson Roger Solomons, however, expressed disappointment about the policy statement, saying the government had decided to stay on the same low-growth-high-debt trajectory.
“Debt remains the biggest threat to our nation’s future. This year we are spending R388.9bn in interest on our national debt. This is unsustainable,” Solomons said. “Added to this, tax collection will be R22bn lower than estimated in February’s national budget. Money is going out faster than it is coming in, and creating a surplus is not sufficient.”
Minerals Council SA spokesperson Allan Seccombe said the MTBPS highlighted that the slightly higher growth forecast was a function of improved power supply and better business, consumer and investor confidence tied to the GNU.
“Importantly, to ensure sustainable public finances, growth needs to improve to well beyond 2% on a sustained basis. For this to materialise, nonenergy growth constraints and structural reforms must be tackled with vigour.”
Public-interest law centre Section 27 said SA’s government faced international criticism for not using fiscal policy to tackle inequality, poverty and unemployment. “The latest MTBPS reinforces these concerns. To make progress, the government must prioritise fiscal expansion alongside expenditure cuts,” it said in a statement.
It said the rising debt-servicing costs were “squeezing” education and healthcare funding, underscoring the need for debt reform.
“We continue to urge the government to prioritise rights realisation and ensure that budgets reflect this,” Section 27 said.
FF Plus MP and chief spokesperson on finance, Wouter Wessels, said it appeared through the policy statement that “the blind optimism and vague promises of the past have made way for a more pragmatic perspective on the country’s economic and fiscal problems.” Wessels said focus has shifted to the private sector, “which ought to be nurtured to save the economy”.
“Godongwana aptly described it as a ‘fresh sense of hope, energy and fellowship’. The harsh reality is that government’s debt levels remain unsustainably high and that it will have to lend even more. The budget deficit is growing and for every rand of tax collected by government in the current financial year, 22c is used to service its debt,” he said.
Free Market Foundation CEO David Ansara said while Godongwana had managed to balance the budget, “his government is still far too big and SA taxpayers are still footing the bill”.
Also reacting to the MTBPS, the EFF said it advocated for programmes that “entrench racialised, apartheid-era economic policies, prioritising profits for the private sector over job creation”.
“This coalition [ANC and DA] shamelessly put the interests of the few above the desperate majority of unemployed youth,” the opposition party said.
National Education, Health and Allied Workers Union general secretary Zola Saphetha said the baseline alternative scenarios presented in the MTBPS “prove that neoliberal austerity measures will only yield marginal growth, while increasing unemployment and poverty rates”.
“We therefore call on all our members and society at large to reject austerity and demand that the Treasury reprioritise the budget to ensure the state fulfils its constitutional obligations to the people of SA.”
Cosatu parliamentary co-ordinator Matthew Parks said: “The MTBPS has confirmed that the public service wage bill has shrunk and not grown as a portion of the budget from 35.7% to a projected 31.4%. Frontline services from hospitals to schools, home affairs and the SA Police Service are paying the price for the dangerous reductions in filling essential posts.
“We are witnessing the loss of critical skills. The SA Revenue Service (Sars) has shown that by appointing competent management, removing corrupt elements, filling key vacancies and investing in the capacity of the state, society reaps the rewards of quality public services that spur economic growth. This is the model that needs to be followed, not suffocating the nurse or teacher,” Parks said.
Rise Mzansi president and Scopa chair Songezo Zibi said the party welcomed the policy statement: “It is pragmatic but underscores the point that it will be political choices, rather than financial wizardry, that will bring hope to millions of South Africans. It also shows once again that urgency and pragmatism must be the currency of our time, rather than ideological slogans and dogma.
“Given the fine budgetary line that still had to be walked by Godongwana, the GNU’s first MTBPS comes across as a pragmatic, realistic and credible strategy to again tackle SA’s challenges of low economic growth and high public debt,” North West University Business School economist Raymond Parsons said.
“The 2024 MTBPS was broadly aligned with the GNU’s overarching commitment to higher inclusive economic growth and job creation. It is welcome news that SA is now achieving a primary budget surplus and that the debt-to-GDP ratio is to be stabilised at 75.5%, although debt reduction is to be spread over a longer period.”
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