Opposition MPs cautiously welcomed the medium-term budget policy statement (MTBPS) on Wednesday as an indication of economic revival, but they expressed disappointment that little was done to deal with unemployment.
“The ship is turning in the right direction. We are still concerned about low economic growth. The debt service costs are still very high. We are pleased to see the inflation target has been set [to 3%],” said ACDP chief whip Steve Swart.
Finance minister Enoch Godongwana announced the 3% target — with a one percentage point tolerance on either side to accommodate nominal economic fluctuations — in the MTBPS presented in parliament on Wednesday.
The Reserve Bank is expected to guide inflation and inflation expectations gradually towards the 3% target over the next two years.
“While there are areas of concern, there are signs that the country’s fiscal fortunes are slowly turning the corner,” said Rise Mzansi leader Songezo Zibi.
“A standing concern is the low growth projection. The 1.2% growth forecast is too low to sustain an economy that will create jobs for the millions of South Africans who are without work, many of whom have given up the prospect of ever finding work. The economy needs to grow at a rate of between 4% and 6% to achieve sustainable jobs growth.”
The party also welcomed the revised inflation target of 3%. ”While the overall inflation rate is low, it is still high for the lower-income strata, which underpins the importance of keeping price growth under control,” it said in a statement
DA finance spokesperson Mark Burke said there was much to like about the MTBPS. “A deficit that’s smaller than predicted in May and [the] debt-to-GDP [ratio], which is stabilising this year and is then predicted to come down as a share of the economy for the first time since 2008,” he said.
“The budget also provides certainty and monetary and fiscal policy alignment by announcing a shift to a 3% inflation target. We support the certainty of the new inflation targeting regime.”
UDM chief whip Nqabayomzi Kwankwa said there were signs the “economy is growing”, but EFF leader Julius Malema flatly rejected the medium-term budget.
“There’s no clear plan to deal with unemployment, policing, and defence. Our army is not properly funded ... There is no clear plan on how to address health and the deteriorating infrastructure in SA. There is no strategy on how to deal with corruption,” Malema said.
ATM leader Vuyo Zungula was equally dismissive. “Nothing came out of the MTBPS. The minister highlighted problems but offered no solutions.”
MK party MP Brian Molefe took issue with Godongwana for not mentioning measures to deal with unemployment. According to the Quarterly Labour Force Survey, the country’s jobless rate decreased by 1.3 percentage points in the third quarter to 31.9%. A total of 17-million people are employed, though nearly a quarter of them are in the informal sector.
“The GNU (government of national unity) is not dealing with the real issues of poverty, inequality and unemployment,” Molefe said. “Dealing with inflation is important; we agree we have to deal with it. But we need to deal with unemployment with the same vigour. People want jobs; people are hungry; people are poor.”
Oxford Economics senior economist Jee-A van der Linde said the budget statement reflected favourable fiscal revisions, “largely driven by stronger tax revenue collections for 2025/26 and lower debt-servicing costs. However, the key takeaway is Treasury’s support for a 3% inflation target, a move that constrains the short-term fiscal outlook but could yield long-term economic benefits.”
The revisions to government revenue and debt servicing costs were in line with our expectations. Still, SA’s sluggish economic growth outlook remains a concern and an obstacle to stabilising debt, given the country’s elevated social spending needs.
— Oxford Economics senior economist Jee-A van der Linde
Markets were likely to welcome the Treasury’s commitment to the 3% inflation target, which should provide further support to domestic assets, Van der Linde added.
“The revisions to government revenue and debt servicing costs were in line with our expectations. Still, SA’s sluggish economic growth outlook remains a concern and an obstacle to stabilising debt, given the country’s elevated social spending needs.”
Godongwana claimed that SA was on track to restore fiscal sustainability, but “investors and ratings agencies may want to see further evidence of sustained economic improvement, as well as signs of more policy predictability as they look towards next year’s budget”, Van der Linde said.
Elna Moolman, group head of SA macroeconomic research at Standard Bank, said Godongwana’s announcement that the country’s debt-to-GDP ratio would peak this year, followed by a gradual downtrend, was “the single most important feature of this fiscal statement ... This is consistent with our long-standing view that the government is committed to the planned fiscal consolidation.
“As we expected, revenues for this year were lifted by nearly R20bn (from the 2025 budget estimates), though subsequent revenue estimates were, disappointingly, not increased.”
Moolman said the debt-to-GDP peak this year should be positive for SA’s sovereign credit ratings insofar as it confirms the government’s commitment to fiscal consolidation.
Cosatu parliamentary co-ordinator Matthew Parks said the labour federation noted the turnaround in many key parts of the state, in particular Eskom, Transnet, Metrorail and the SA Revenue Service.
Still, “we remain deeply concerned that the budget, including the MTBPS’s proposed adjustments, is not bold enough to take the economy from the 1% growth it has been stuck at for two decades nor to give hope to 12-million unemployed”.
More on the medium-term budget:
SA’s 3% inflation target sets sights on price stability and investor confidence
Treasury and Reserve Bank set new 3% inflation target
MTBPS reallocates modest fiscal room — who gains and who loses
Treasury lowers growth forecast with eye on protectionism
Finance minister voices concern about health’s plan to scrap medical tax credits
MTBPS shows marginal fiscal gains while debt costs weigh on outlook
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