South African government bonds rallied and the rand gained on Wednesday after Finance Minister Enoch Godongwana delivered his mini-budget. The Medium-Term Budget Policy Statement (MTBPS) showed that government debt as a share of GDP has stopped rising.
The yield on South Africa’s 2048 bond fell 18 basis points to 9.16%. Some investors then took profits, and it settled at 9.20% at 14:48. The rand moved to R16.36 to the US dollar, up from R16.43 before the statement was released.
“All in all, this is a good, bond-friendly budget. It confirms that debt to GDP has peaked and will fall gradually, and rating agencies should receive it well,” said Adam Furlan, a portfolio manager at Ninety One, according to News24.
“The rand reacted marginally positively, but the bigger move was in bonds,” Furlan said.
According to the MTBPS, gross tax revenue for the 2026/27 financial year is R17.1 billion higher than Godongwana first expected in his February Budget. This helped bring the consolidated budget deficit down to 3.9% of GDP in 2026/27. The deficit was 4.2% the year before.
The statement showed debt to GDP levelled off at 78.4% in 2025/26. Treasury expects it to dip to 78.2% in 2026/27. It projects further declines over the next ten years.
The government also plans a bond buyback programme in 2026/27. Under this plan, it will swap shorter-term debt that is close to maturity for longer-dated debt. This can lower interest costs, which already take up 21 cents of every R1 the government collects.
Absa strategists Mike Keenan and Siyasiya Nonkonela said in a client note that Treasury has in the past used switch auctions to manage repayments. They said that approach pushes the debt into the future and can keep long-term borrowing costs high.
“Bond buybacks, on the other hand, actively reduce the debt stock and can generate instantaneous savings for the National Treasury if the discount bonds are redeemed prior to the scheduled maturity date,” the two strategists wrote.
Keenan and Nonkonela said the higher revenue allowed the government to cut its weekly auction of nominal bonds by about R600 million to R1.95 billion. The weekly auction of inflation-linked bonds was cut by about R100 million to R900 million.
Even with less borrowing, the government still found money for temporary fuel price relief. The fuel levy will drop by R3 per litre for diesel and R1.50 per litre for petrol from 4 November until 1 December.
After that, the relief will shrink to R1.50 per litre for diesel and R1 per litre for petrol. The relief will cost the state about R10 billion in lost revenue.
The budget also proposed a fiscal anchor written into law, which could please rating agencies. Treasury chose a set of principles instead of a fixed number.
The International Monetary Fund had advised South Africa to aim to lower debt to 70% of GDP by 2030. Treasury instead suggested that after each general election, the cabinet should set out its money goals for the next five years.
Source: this article is based on reporting by News24. Image: News24. 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.