We are at an important turning point in South Africa’s fiscal trajectory. The medium-term budget policy statement in November projected that debt would stabilise as a share of GDP for the first time since 2009. Next month’s budget will show we are on track to achieve this target and to reduce the debt over the medium term and beyond.
Improved fiscal conditions will reduce the cost of servicing our debt, freeing up resources for critical frontline services and investment in public infrastructure. We are already seeing the benefits: bond yields have fallen, the currency has strengthened, and South Africa has had its first ratings upgrade in 16 years from a major global credit rating agency.
Our fiscal strategy since 2024 has been to run a growing primary surplus — in which the government’s revenue is ever larger than its non-interest spending. The 2026 budget will show we have achieved a third consecutive primary surplus and are on track to increase this over the medium term. As we narrow the deficit and reduce the debt in coming years, it will benefit the economy as a whole.
Lower interest rates across the economy lower costs for households and businesses, support the nascent recovery in confidence, and ultimately drive higher economic growth and faster job creation. Next month’s budget will build on these early successes and continue the government’s efforts to strengthen fiscal credibility.
The tabling of the 2026 budget on February 25 will inevitably prompt comparisons with the contestation over last year’s budget. The 2025 budget was finally approved at the third attempt. And while the process was far from ideal, it spawned a series of reforms based on the lessons learnt.
The 2026 budget will target further efficiency savings in areas such as ghost workers and early retirement.
Some of these budget reforms were conceptualised in 2024 when the National Treasury recognised the need to improve consultation on the budget and more strongly embed spending efficiency into the process. Successfully implementing the budget reforms that are underway will be important to continue building fiscal credibility and strengthening public trust in the budget.
For the first time, in 2025, the cabinet endorsed the budget guidelines issued to departments. The technical committee on the budget, which until last year was called the medium-term expenditure committee, was reconfigured. It now has a broader mandate and comprises many of the most experienced directors-general in government. They advise the ministers’ committee on the budget, which further informs the submission to the cabinet.
The National Treasury has over the past two years developed a proposal for a formal fiscal anchor, and we will provide an update in next month’s budget as promised.
Consultation with government of national unity partners has been formalised, with formal discussions with the legislature (represented by the speaker and chair of the National Council of Provinces) and judiciary (represented by the chief justice). As the National Treasury works to finalise the budget, these committees have already started to convene to discuss the often tough decisions that must feed into that framework.
Last year’s contested budget process also highlighted the need to improve the efficiency of government spending. We have commenced implementation of an efficiency drive into government operations and hardwired it into the way departments think about their budgets. Starting in 2025, all departments implemented a new programme assessment matrix. This requires them to use standardised metrics to assess their spending and identify low-priority or underperforming programmes that can be reviewed or rationalised.
The 2025 budget launched the targeted & responsible spending programme (Tars) to review projects and programmes to cut waste and duplication and redirect limited resources towards high-impact programmes. In the medium-term budget we pencilled in R6.7bn of Tars savings, mainly from ineffectual public transport grants and wastage in the social grants system.
The 2026 budget will target further efficiency savings in areas such as ghost workers and early retirement. Making Tars work requires political will and difficult trade-offs. It will take time for it to unlock significant savings.
The budget reform that can best ensure the government sustains South Africa’s improving fiscal credibility into the long term is the introduction of a binding fiscal anchor. The National Treasury has over the past two years developed a proposal for a formal fiscal anchor, and we will provide an update in next month’s budget as promised.
As highlighted by the finance minister in November, we are exploring a principles-led approach rather than a hard numerical rule. It would provide for clear parliamentary oversight and stronger reporting on fiscal risks. As the government binds itself to fiscal sustainability, we can ensure socioeconomic rights continue to be realised, and the budget can deliver for all.
Higher growth path
The government’s strategy to put South Africa on a higher growth path rests on four pillars: fostering macroeconomic stability, improving state capacity, catalysing economic reform, and investing in infrastructure.
Lifting the level of investment in infrastructure is key to driving higher growth and providing more and better quality public services. We have embarked on a range of reforms to mobilise private resources for this and ensure projects are delivered more effectively and efficiently.
In December we listed South Africa’s first infrastructure bond on the JSE, creating a new asset class for investors. We have also made progress in establishing a new credit guarantee vehicle that will incentivise private sector investment, at scale, in priority infrastructure, starting with the expansion of the electricity grid.
Another milestone was the signing early in 2026 of an agreement to establish a new infrastructure finance & implementation support agency that will crowd in private participation to augment public sector capacity and finances. And we are working to improve the government’s own capacity to finance and deliver projects effectively.
In the 2025 medium-term budget, the finance minister announced a lower inflation target, enhancing macroeconomic stability and the credibility of monetary policy. Evidence that we are delivering on our fiscal strategy has further strengthened macroeconomic stability.
The 2026 budget will show we are on track to continue building fiscal credibility while we make progress on budget reforms that support the government’s ability to deliver on the other pillars of growth.
• Dr Pieterse is director-general of the National Treasury.
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