MTBPS reallocates modest fiscal room — who gains and who loses

The medium‑term budget policy statement (MTBPS) delivered by finance minister Enoch Godongwana makes clear that fiscal consolidation remains the anchor, but within that discipline there are distinct winners and losers in the allocation of public funds.

Stronger‑than‑expected revenue collections — R19.3bn above the 2025/25 budget estimate — allowed the Treasury to adjust spending plans, with R15.8bn in additional non‑interest expenditure spread across urgent priorities.

Winners: Social wage and infrastructure

The social wage still dominates, absorbing about 60% of consolidated non‑interest spending. Within this, health, education and social development all see gains:

Health rises to R298.9bn, with provisional allocations of R20.8bn over the medium term to employ doctors, cover accruals and retain professionals. Provinces also receive R590m in 2025/26 to offset the withdrawal of the President’s Emergency Plan for Aids Relief (Pepfar) funding for HIV/TB programmes.
Basic education increases to R347.9bn, with R19.5bn earmarked for compensation costs and early childhood development. Teacher and learner audits are expected to free resources for frontline pressures.
Social development climbs to R425bn, reflecting the extension of the special relief of distress (SRD) grant until March 2027 and stricter income verification to reduce fraud.
Infrastructure is another clear winner. Capital payments are the fastest‑growing item of expenditure, rising at 7.3% annually. The budget facility for infrastructure has accepted projects worth R379.1bn, including the Square Kilometre Array, the Polokwane wastewater works and major rail corridor rehabilitations. Local government metros benefit from the new R54bn performance‑linked trading services grant, expected to unlock R108bn in investment.

Losers: Personnel growth and weaker municipalities

The public‑sector wage bill, projected at R817.5bn in 2025/26, faces tighter ceilings. Payroll cleanups, vacancy management and early retirement programmes are expected to deliver savings, but departments will have less room to expand staff complements.

Municipalities with poor governance are also losers. While local government transfers rise to R180.6bn, smaller municipalities face stricter conditionality. Eskom arrears ballooned to R94.6bn by March 2025, prompting the Treasury to enforce distribution agency agreements where Eskom temporarily operates municipal electricity services. Funding is being redirected to maintenance and project completion rather than discretionary transfers.

Mixed fortunes: Provinces and Setas

Provinces receive R787bn, a moderate increase, but conditional grants are being reorganised to emphasise outcomes and capital maintenance. Gains in health and education are offset by tighter controls in agriculture and transport.

Sector education & training authorities (Setas) are singled out for weak performance. Certification backlogs, poor procurement and unspent rollovers undermine skills financing. Future transfers will be contingent on verified outputs such as completions and placement rates, meaning well‑run Setas stand to gain while poorly governed ones risk losing access to funds.

The balance sheet

The gross borrowing requirement is revised down to R568.2bn in 2025/26, supported by stronger revenue and lower debt‑service costs. But contingent liabilities remain elevated at R707.8bn, with new support of R145.8bn to Transnet.

Bottom line

The Treasury’s message is that fiscal consolidation will continue, but within it, resources will be channelled to those who can spend effectively and deliver outcomes.