Good news expected this week for South Africa
South Africa’s Medium-Term Budget Policy Statement (MTBPS) is expected to bring good news for businesses and the government over the country’s debt levels.
Since 2008, South Africa’s debt-to-GDP ratio has grown from roughly 30% to nearly 80%, undermining business confidence.
The growing debt led rating agencies such as Moody’s and S&P to rate the country’s debt as “junk status”.
This led to a rise in borrowing costs, placing pressure on both the government and every business operating in South Africa.
While debts have grown sharply in recent years, Business Leadership South Africa (BLSA) CEO Busisiwe Mavuso said the next MTBPS will bring good news.
She said the statement from Finance Minister Enoch Godongwana will show a “major success” from the country’s reform efforts.
She said the MTBPS will show “revenue collection that is beating forecasts, falling levels of debt and a government that is spending within its means.”
“The figures this week will show that last year was the peak of the debt-to-GDP ratio and that the curve is now on a downward trend,” she said.
She said the change in South Africa’s debt levels is due to increased discipline from the National Treasury.
“Treasury has used the medium-term expenditure framework guidelines to impose discipline,” she said. “Additions to the overall budget are only considered once savings have been found.”
“Revenue that exceeds forecasts can only finance temporary needs or debt reduction, not permanent spending.”
Mavuso said the turnaround has been aided by fewer bailouts for state-owned companies, with some returning to profitability.
Both Eskom and Transnet reported profits in the last financial year, while other companies have not been as reliant on government support as in the past.
Mavuso noted that “South African Airways, the Post Office and the SABC remain financial headaches, but not at the level of constant bailouts.”
Confidence is growing
The improved fiscal discipline has translated into positives for South Africa, with more good news expected down the line.
Recently, global rating agencies revised their outlooks on South Africa, with further rating upgrades expected.
“I expect to see further upgrades after this week’s figures,” Mavuso said. “Upgrades contribute to a virtuous circle, reducing borrowing costs and allowing government to direct spending to other priorities.”
Mavuso is not the only person expecting good news for South Africa’s credit rating, with PSG chief economist Johann Els also forecasting a revision of the ratings.
Els said that agencies such as Moody’s and S&P would likely welcome the news from the MTBPS, but they may wait for confirmation in next year’s budget.
“Further ratings upgrades are likely to occur, but the question is whether we see more action after the MTBPS or whether the agencies wait for confirmation in the February 2027 Budget,” he said.
“South Africa could be back in investment-grade territory within two to three years, with at least one or two of the three major ratings agencies potentially upgrading the country back to investment grade.”
While Mavuso said the country’s fiscal outlook is largely positive, she noted that economic growth is still holding South Africa back.
“With the economy now expected to grow barely above 1% this year, there is little momentum to support improving revenues for the government,” she said.
She noted that the government’s increased revenue is largely due to improved collection efforts and higher commodity prices in the last year.
While economic growth has been stagnant in recent years, Mavuso noted that the government could improve this through increased investment.
“The one fiscal component that can further help is government investment,” she said. “Despite over a trillion rand budgeted, spending has consistently fallen short.”
“Treasury can redouble efforts to support departments and local government to successfully implement infrastructure projects.”
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