Sanisha Packirisamy, Chief Economist; and Tshiamo Masike, Economist; at Momentum Investments
A stronger fiscus starts with firmer growth
Durable fiscal improvement hinges on expanding South Africa’s (SA) growth potential. The International Monetary Fund (IMF) projects SA growth of 1% for 2026, underscoring the urgency of reform. Freight rail access is opening to private operators, while the president’s July endorsement of an independent transmission operator has advanced electricity restructuring. These reforms could unlock investment and broaden the tax base. While commodity windfalls support near-term revenues, lasting fiscal resilience requires stronger growth, disciplined spending, reduced exposure to struggling state-owned enterprises and increased resilience to global shocks.
Mining gains bolster the tax take
Precious metals are supporting SA’s revenue growth, although gains extend beyond mining. Between April and August 2026, tax collections rose 7.9% year-on-year (y/y) to R819.8 billion, with corporate income tax (CIT) increasing 22.8%. Mineral and petroleum royalties reached R9.7 billion, compared with R3 billion last year. Higher commodity prices boost mining profitability and fiscal revenue, while high oil prices partly offset these gains. Personal income tax (PIT) and value-added tax (VAT) remain the main revenue sources, making job creation, consumer spending and improved compliance key to sustaining collections beyond the commodity upswing.
Stronger collections support fiscal repair, but spending quality matters
Higher revenue is helping narrow SA’s budget deficit, although infrastructure spending remains uneven. According to Treasury, government revenue increased 9.5% y/y to R812.3 billion between April and August 2026, relative to the same period in the previous fiscal year (FY), outpacing expenditure growth of 4.6% y/y to R1 001 billion. The deficit fell to R188.8 billion. However, departments spent 34.2% of their annual capital allocations, with Health at 20.2% and Water and Sanitation at 25.8%. While this raises concerns about project delivery, spending schedules must be considered before treating the gaps as underspending or permanent fiscal savings.
National fiscal gains face a local delivery test
National fiscal repair faces a growing test at municipal level where weak governance, poor collections and deteriorating infrastructure undermine services and create pressure for additional support. The Auditor-General found that no metro achieved a clean audit in FY2024/25. Municipal capital spending fell R18.6 billion short of budget in FY2025/26, despite national transfers. Treasury’s temporary withholding of funding highlights the tension between enforcing accountability and protecting communities. Ahead of November’s local elections, service delivery failures could intensify political competition, while unstable councils risk delaying reforms.
Fiscal gains will anchor ratings, but economic growth is likely to set the pace
SA’s improving fiscal trajectory is supporting sovereign ratings momentum, but weak growth remains a constraint on further upgrades. S&P and Fitch rate SA’s foreign-currency debt at BB, while Moody’s assigns a Ba2 rating, all two notches below investment grade. S&P and Moody’s have positive outlooks, while Fitch’s is stable. Agencies recognise sustained primary surpluses, debt stabilisation and reform progress, but slower reform delivery, oil shocks and spending pressures could stall improvement. A credible fiscal anchor would strengthen accountability and policy continuity, helping preserve fiscal gains while growth-enhancing reforms take effect.
Read Momentum Investments’ full note here.
Frank Blackmore, Lead Economist at KPMG South Africa
On Wednesday, 21 October, Finance Minister Enoch Godongwana will table the 2026 Medium-Term Budget Policy Statement. Our predictions for what we may see in this policy statement are as follows:
A lot of the economic activity that was projected for this year is likely to be revised downward. This is largely due to heightened global uncertainty. The war in the Persian Gulf region has created additional inflationary pressure, leading many countries to enter a rate-hiking cycle. Those higher interest rates have weighed on economic growth, meaning growth forecasts may need to be adjusted lower.
Lower levels of economic activity would, in turn, contribute to lower revenues flowing into government coffers. While South Africa may continue to benefit from increased revenue from the mining sector through late 2025 and the first part of 2026, we believe the overall effect could still be a modest increase in both the fiscal deficit and government debt.
That said, we expect the government to retain a positive balance on the non-interest portion of its finances. In other words, the primary surplus is likely to be maintained, although its size may be slightly reduced to accommodate planned expenditure during a period of slower economic growth.
Given the lower level of economic activity, we do not expect any major announcements relating to new taxes or additional revenue measures at this stage. Any significant changes are more likely to be outlined in the main Budget next February.
Overall, we expect a relatively uneventful policy statement, with adjustments to expenditure and revenue projections reflecting the impact of ongoing economic uncertainty. Beyond that, the broader fiscal path is likely to remain unchanged. We expect government to continue its fiscal consolidation efforts, which have been an important contributor to the positive momentum seen since late 2025, including sovereign credit rating upgrades, progress on inflation, and improved investor confidence. We believe policymakers will be keen to maintain that momentum through this Medium-Term Budget Policy Statement.
Itumeleng Nkadimeng, Partner Corporate Tax KPMG South Africa
On 21 October 2026, Finance Minister Enoch Godongwana will deliver the Medium-Term Budget Policy Statement, the key health check not only on South Africa’s public finances, but also an indicator of the anticipated direction of policy over the medium term.
Importantly, this Medium-Term Budget Policy Statement comes at a delicate time. Growth is weak, the global environment is uncertain, and spending pressures at home are building. Yet, there are some reasons for cautious optimism.
In the first instance, government is expected to benefit from larger than anticipated tax revenue, helped by better collections and personal income tax, VAT, and the mining sector. This will give Treasury some breathing room and should allow the overall budget balance to look a little healthier than what was projected earlier this year, at the time of the Budget, with the fiscal gap gradually narrowing.
In line with trends in prior years, we do not expect broad-based tax hikes or indications in that direction. Instead, the emphasis is likely to remain on SARS tightening enforcement, modernising VAT systems, and improving administration. Simply put, it’s collecting existing taxes more efficiently rather than raising new ones.
So, what can taxpayers expect from the Medium-Term Budget Policy Statement?
We anticipate clearer guidance on a fiscal anchor, so a framework to keep debt and deficits on a sustainable path, but maintaining support for an environment fit for the broadening of the tax base.
While the economic backdrop remains challenging, infrastructure investment is set to continue to play a central and critical role. If project implementation improves, the spend should support business activity and ultimately help lift tax revenues, reinforcing the budget’s positive momentum, even in a low-growth environment.
Ultimately, sustainable tax revenue follows a sustainable economic activity.
Hayley Parry, Money Coach and Facilitator at 1Life Truth About Money
The question most South Africans are asking is a simple one: What does the MTBPS mean for my pocket?
While the mini-budget isn’t traditionally where major tax changes are announced, it gives us an important indication of where the economy is heading and what pressures households might face in the months ahead.
There are three things I’d encourage consumers to watch.
Firstly, inflation and the cost of living. Even when inflation slows, prices aren’t necessarily coming down. Families are still feeling the cumulative impact of higher food, transport and household costs.
Secondly, economic growth and employment. We need to see credible plans to stimulate growth and create jobs, because ultimately, improving household finances depends on people’s ability to earn an income.
And thirdly, government spending and debt. The more government spends servicing its debt, the less money is available for the services and infrastructure that South Africans depend on.
At TAM, we believe financial wellbeing isn’t just about how much you earn. It’s also about how effectively you manage what you have.
So, while we wait to see what government announces, my message to consumers is to focus on what you can control: understand where your money is going, prioritise paying down expensive debt, and build financial resilience, even if you’re starting small.
Ultimately, a stronger economy should translate into stronger households. That’s the real measure of progress.
ENDS
