Economists surveyed by Bloomberg expect tax collections to exceed the Treasury\u2019s May forecast of R1.985 trillion by R20 billion in the year through March 2026. <\/p>\n\n\n\n
That\u2019s likely to lower the consolidated budget deficit to 4.5% of gross domestic product, better than the Treasury\u2019s 4.8% projection.<\/p>\n\n\n\n
Such an outcome would also offer a filip to South Africa amid tensions<\/a> with the US over tariffs and President Donald Trump\u2019s false claims that White farmers are facing a genocide. <\/p>\n\n\n\n \u201cThis is a turning point. This really is a significant inflection point,\u201d said Andrew Matheny, economist at Goldman Sachs Group Inc. <\/p>\n\n\n\n He sees revenue outperforming by as much as R55 billion, or 0.7% of GDP, which could \u201ctake the deficit quite a bit narrower.\u201d<\/p>\n\n\n\n When Godongwana delivers the budget update to lawmakers, investors will be watching for signs that the extra revenue is being used to cement fiscal consolidation.<\/p>\n\n\n\n The improvements in South Africa\u2019s public finances and overall debt metrics \u201cwill be very much key to investor sentiment across the board,\u201d Casey Sprake, economist at Anchor Capital said. <\/p>\n\n\n\n \u201cIt\u2019s very much the one measure that\u2019s sort of hampering a renewed positive focus on South Africa.\u201d<\/p>\n\n\n\n With improved value-added tax receipts and more solid personal and corporate income tax collections, \u201cthe near-term fiscal picture appears comparatively healthy,\u201d she said<\/p>\n\n\n\n The stronger position gives Godongwana scope to channel funds toward infrastructure and reform priorities, critical to lifting South Africa\u2019s growth rate out of inertia. <\/p>\n\n\n\n He will also be watched for any help to embattled state-owned ports and rail firm Transnet SOC Ltd., which is seeking additional financial support.<\/p>\n\n\n\n \u201cIt\u2019s part of the infrastructure story, and there may be additional money going towards it,\u201d said Frank Blackmore, lead economist at KPMG in South Africa. <\/p>\n\n\n\n \u201cBut there will be more emphasis on private sector coming in with their money.\u201d\u00a0<\/p>\n\n\n\n The mid-term budget will also be scrutinized for the politics around the spending choices by the governing coalition.<\/p>\n\n\n\n The so-called government of national unity \u2014 formed by the African National Congress with nine other parties after it lost its outright majority in elections last year \u2014 needs to demonstrate policy credibility to sustain a rally in government bonds and lure back fixed investment that has been fading.<\/p>\n\n\n\n The rally since the GNU was formed has reduced yields on the government\u2019s 10-year benchmark by 255 basis points. <\/p>\n\n\n\n And while some of that gain reflects broader demand for emerging-market assets, South Africa\u2019s performance has stood out, with the central bank\u2019s\u00a0loud advocacy<\/a>\u00a0for aiming inflation at a lower target also boosting sentiment.<\/p>\n\n\n\n Economists\u00a0expect<\/a>\u00a0the finance minister to endorse the 3% inflation goal, formalizing a shift announced by the central bank in July. <\/p>\n\n\n\n It would be the first adjustment to the framework since the current 3% to 6% target range was introduced in 2000 and a step toward entrenching lower price pressures and borrowing costs.<\/p>\n\n\n\n Markets are also betting that a narrower deficit will allow the Treasury to scale back domestic bond issuance, relieving pressure on yields. <\/p>\n\n\n\n Bank of America Corp. reckons the Treasury has room to reduce fixed rate issuance by as much as R250 million per auction.<\/p>\n\n\n\n Investors will be watching the debt strategy closely, Matheny said. \u201cThey might want to proceed cautiously\u201d to see if the fiscal improvements are sustained, he said.<\/p>\n\n\n\n South Africa\u2019s removal from the Financial Action Task Force\u2019s gray list\u00a0last month<\/a>, improved fiscal metrics and political stability within the coalition government have lifted hopes for a\u00a0credit rating upgrade<\/a>\u00a0when S&P Global Ratings releases its review on Friday. <\/p>\n\n\n\n Four of eight economists in a Bloomberg survey predict an upgrade.<\/p>\n\n\n\nInflation Target<\/h2>\n\n\n\n
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<\/a><\/figure>\n\n\n\nRatings Upgrade<\/h2>\n\n\n\n