South Africa’s October 2026 Medium-Term Budget Policy Statement (MTBPS) carries a valuable lesson for governments across Africa: fiscal credibility is not built by announcing austerity. It is built by demonstrating how public finances can stabilise while the state continues to deliver essential services and support economic growth.
Finance Minister Enoch Godongwana presented the MTBPS in Parliament, projecting that the budget deficit would narrow from 4.3% of GDP in 2026/27 to 2.5% by 2029/30. He also unveiled draft legislation for a principles-based fiscal anchor designed to entrench fiscal sustainability across future administrations.
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South Africa has reached a potential turning point in its debt trajectory, a development few emerging markets have achieved in the post-pandemic era. Gross debt stabilised at 78.4% of GDP in 2025/26, with the National Treasury projecting further declines as the primary surplus grows and the deficit narrows. The consolidated budget deficit is estimated at 4.3% of GDP for 2026/27, improving on the 4.5% forecast in February, and is projected to fall to 2.5% by 2029/30. The primary budget balance, which excludes interest costs, is expected to rise from a surplus of 1.7% of GDP this year to nearly 3% by 2030, reducing the government’s reliance on new borrowing.
Stronger-than-expected revenue collections have improved the fiscal outlook. Tax revenue for 2026/27 was revised upwards by R17.1 billion, petroleum royalties by R6.8 billion, and departmental revenue by R14.3 billion, bringing the total improvement to R54.1 billion above the February budget estimate. This provides additional support for the infrastructure pipeline approved through the Budget Facility for Infrastructure while allowing the government to increase its contingency reserve. However, the National Treasury and independent economists caution that temporary revenue gains do not amount to structural reform. Distinguishing one-off windfalls from recurring revenue remains essential when making spending commitments.
South Africa has also released draft legislation for a principles-based fiscal anchor, which is expected to be tabled in Parliament in 2027. Rather than imposing a rigid numerical ceiling, the proposed framework would establish fiscal sustainability as a standard under the Public Finance Management Act. Following each general election, administrations would be required to commit to fiscal objectives consistent with their electoral mandates and report on their progress at every Budget. The Financial and Fiscal Commission would independently assess whether the fiscal framework aligns with the administration’s plan. Godongwana stated: “Fiscal sustainability cannot depend on the commitments of a single administration”.
Despite this progress, South Africa’s debt-service costs remain a significant constraint. These costs stabilised at 21.3% of main budget revenue in 2024/25 and are projected to average 20.6% over the medium-term expenditure framework period. Moody’s broader measure, which includes state-owned enterprise guarantees, puts interest payments at 18.8% of general government revenue in 2025, a weaker position than that of many similarly rated peers. This burden limits the fiscal space available for infrastructure, education and social services, making the primary surplus essential to creating room for productive investment.
Fiscal consolidation alone cannot stabilise debt if economic growth remains weak. The National Treasury lowered its 2026 growth forecast from 1.6% to 1.2%, citing infrastructure constraints and pressure on household finances. Citadel chief economist Maarten Ackerman estimates that growth will reach just 0.8%. Moody’s expects stronger investment, supported by ongoing reforms, to raise real GDP growth gradually to around 2% by 2028. The gap between current growth and the pace needed to generate jobs and tax revenue illustrates the central challenge: a government can improve its budget balance while the economy remains too weak to make its debt burden easier to manage over time.
Moody’s revised South Africa’s sovereign credit rating outlook from stable to positive in May 2026, affirming its Ba2 rating and making South Africa the only G20 nation with a positive outlook from the agency at that time. Moody’s cited gradually strengthening fiscal performance and a sustained commitment to structural reforms, expecting the primary fiscal surplus to rise to around 2% in 2028 and support a gradual decline in the debt-to-GDP ratio. This followed a one-notch upgrade by S&P Global Ratings in November 2025, alongside a retained positive outlook. Moody’s positive outlook was its first for South Africa since 2007, preceding an upgrade in 2009.
The difference between the Treasury’s debt-to-GDP figure of 78.4% and Moody’s broader peak estimate of 86.8% highlights the importance of transparent debt reporting. Moody’s measure includes state-owned enterprise guarantees and other contingent liabilities that could eventually become public costs. The agency estimates that general government debt peaked at 86.8% of GDP in 2025 and will decline gradually to 84.9% by 2028. For African governments seeking investor confidence, disclosing the full extent of public-sector exposure, rather than reporting central-government borrowing alone, is essential to identifying risks before they trigger emergency borrowing.
South Africa’s fiscal stabilisation contrasts with the varied fiscal positions of other African economies. Nigeria’s debt-to-GDP ratio is projected to decline to 32.3% in 2026 from 35.5% in 2025, according to the IMF, although interest payments continue to consume a significant share of government revenue. Kenya’s general government gross debt stands at 72.9% of GDP, with a fiscal deficit of 6.6%, according to IMF data. Ghana’s public debt reached 45.1% of GDP in May 2026, comprising domestic debt of 23.7% and external debt of 21.4%. These figures underscore that the lesson for Africa is not to replicate South Africa’s targets, but to adopt the underlying discipline: credible plans, transparent assumptions and fiscal rules that endure beyond political cycles.
