What to expect from the medium-term budget
The medium-term budget policy statement (MTBPS) is fast approaching, with economists hoping for more updates on key reforms to boost the economy.
Finance Minister Enoch Godongwana will deliver the delayed medium-term budget on 12 November 2025.
Citadel Chief Economist Maarten Ackerman said that the new budget will come at a markedly different time both politically and economically compared to the start of the year.
The February National Budget was cancelled amid a proposed two percentage point increase in VAT.
With two budgets tabled after that—the May budget finally being adopted without a VAT hike—the MTBPS, usually tabled in October, was delayed to November.
“When the February budget was conceived, global uncertainty was high, particularly due to United States President Donald Trump’s renewed trade conflict rhetoric,” said Maarten Ackerman, Chief Economist at Citadel.
“The budget, while optimistic on growth, acknowledged persistent fiscal strain, with debt-to-gross domestic product (GDP) projected to peak near 80%, a key justification for the proposed VAT hike.”
However, the picture has now shifted, with the feared fallout from tariff hikes having been less severe than anticipated.
South Africa has benefited from unexpected tailwinds. Concerns over the US dollar’s reserve currency status have buoyed gold and increased South Africa’s exports.
Ackerkman added that policy shifts in the US, such as cancelling the electric vehicle subsidies, supported a platinum rally in South Africa. Other sources link the platinum rally to local supply issues.
These mining rallies boosted the JSE to record highs, helping to strengthen the rand.
“These developments have certainly eased fiscal pressure, but the recovery remains largely commodity-driven, not broad-based,” said Ackerman.
“With low productivity and high population growth, South Africa’s potential growth remains around 1%, far too low to achieve meaningful fiscal consolidation.”
He added that stronger-than-expected GDP growth and improved revenues from commodity gains have contributed to lower bond yields.
Expectations
Ackerman said that the National Treasury wants to maintain a disciplined fiscal stance while adopting a cautiously optimistic tone.
“Although growth has improved slightly, both the fiscal deficit and debt-to-GDP ratio remain elevated. National Treasury’s revised revenue and growth assumptions will likely reflect optimism that may not fully align with the realities of global and domestic headwinds.”
Citadel sees sub-1% growth for 2025, improving modestly to between 1% and 1.5% in 2026. This is a bearish view, contrasting the wider consensus that growth will be between 1% and 1.2% in 2025.
He added that the MTBPS comes at a pivotal moment for South Africa’s international credibility, which comes shortly after being removed from the FATF.
Removal from the grey list may help support foreign capital inflows and boost investor sentiment in South Africa.
Despite short-term improvements, Ackerman warned against complacency and said that South Africa must accelerate reforms.
“To truly strengthen our fiscal position, South Africa must accelerate reforms that improve the ease of doing business, reduce red tape, address infrastructure bottlenecks and enhance competitiveness,” he stressed.
“Only through sustained reform and growth exceeding 2.5% can South Africa begin to stabilise its debt trajectory and achieve lasting fiscal consolidation.”
Frank Blackmore, Lead Economist at KPMG, added that the National Treasury’s growth figures from May, which saw 1.4% growth for 2025, rising to 1.7% in 2027, will likely be downgraded.
Blackmore said that this impact will be that ratios in terms of GDP will increase considerably over this period.
The lack of growth will also mean that revenue forecasts will not meet expectations in certain areas.
“We may see the introduction of new revenue and expenditure measures, and potential reforms to specific public service programs being announced in the upcoming MTBPS,” said Blackmore.
“We need to keep in mind that the details of the taxes and expenditure programs will not be provided in the medium-term budget, but those specifics will be outlined in next year’s national budget.”
Blackmore added that emphasis will also be placed on fiscal consolidation and the progress of the budget in this regard, as well as the progress made on infrastructure and job creation.
Emphasis will still be on fiscal consolidation and the progress of the budget in that respect, as well as certain progress on infrastructure and job creation, which are the two important initiatives.
Blackmore said that, most importantly, the MTBPS will provide a response to the government’s Operation Vulindlela initiative and outline the progress made so far.
South Africans can expect to get updates on the public sector reforms, which are usually addressed alongside government debt and inflation targeting.
South Africans can also expect early insights into next year’s budget, including both revenue and expenditure measures.
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