Finance Minister Enoch Godongwana will deliver the Medium Term Budget Policy Statement (MTBPS) in the National Assembly in Cape Town on Wednesday. Economists say higher than expected tax revenue has put government finances on a better footing.
The MTBPS is where the National Treasury sets out its plans for government finances over the next three years. It looks closely at how revenue and spending have performed in the current 2026/27 financial year.
According to economists, Treasury reports for the past six months have shown healthy tax income from several sources. These include personal income tax, value-added tax and company tax.
Economists said company tax was boosted in large part by strong commodity prices. This came even as the economy faced higher inflation and, more lately, higher interest rates.
They expect Godongwana to stick with fiscal consolidation, which includes keeping government debt stable. Some also expect him to announce a fiscal anchor.
Citibank chief economist Gina Schoeman explained what that would mean. “A fiscal anchor simply means that this National Treasury is going to do what it has been doing for some years, except it wants to legislate what it has been doing, which is running a primary surplus as the means to stabilise debt in the absence of sufficient growth,” she told SABC News.
Schoeman said such an anchor would no longer be needed if the economy grew a lot stronger because of reforms. She said growth itself would then widen the revenue base.
“It would rather be entrenched growth creating sustainable revenue in South Africa,” she said. She added that the country would not have to wait for windfalls from corporate tax when commodity prices do well.
Rising fuel prices are expected to push inflation even higher. This has led some to ask whether Treasury might cut the fuel levy again, as it did in the second quarter of this year.
PSG chief economist Johann Els said there was some room in the budget because tax collections had beaten forecasts across many categories. But he warned against using up all of the extra money.
“I don’t think we should squander all that tax overrun because that is an important part of the future that’s good for all of us if we do get ratings upgrades,” Els said.
Els said the benefits of the extra revenue include a lower deficit and the debt to GDP ratio peaking and then coming down.
Not everyone supports Treasury’s approach. At its 15th National Congress, the Congress of South African Trade Unions (Cosatu) criticised what it called the government’s continued neo-liberal policies. The federation said these policies go against the needs of ordinary citizens.
“Budget cuts, wage restraints, weak public investment and efforts to shrink the state have directly weakened the state’s ability to respond to unemployment, poverty and inequality,” Cosatu deputy general secretary Gerald Twala said. He called it “a political choice, not an economic decision”.
The mid-term budget does not usually deal with specific tax changes. Even so, some civil society groups continue to call for a wealth tax. They want the tax burden moved away from working class people who face a high cost of living.
Chloe van Biljon, an officer at the Tax Justice Project, said the groups want Treasury to be open to new ideas. “I think we would just like to see an openness to engage with some of this to say where tax policy can be more progressive, where there can be space to raise more revenue,” she said.
Economists said that if Treasury keeps to fiscal consolidation, South Africa could see better credit ratings. They said this would make borrowing for investment cheaper and should help boost economic growth.
Source: this article is based on reporting by SABC Business. Image: SABC Business. Written with the help of AI and published by the Tzaneen Voice Business desk. See our Editorial Standards.
Anelisa Nkuna covers business and money news for Tzaneen Voice. Anelisa reports on the rand, fuel prices, interest rates, jobs, Eskom, Transnet, farming and company results. The aim is simple: explain what the numbers mean for household budgets, small businesses and workers in South Africa.