South Africa Turning the Corner After 17 Years of Rising Debt
South Africa may finally be turning a financial corner after more than a decade of economic strain, according to Finance Minister Enoch Godongwana.
Speaking during the 2026 National Budget, Godongwana said the country is beginning to see meaningful improvements in its fiscal position, with government debt expected to stabilise for the first time in 17 years.
Over the past decade, South Africa’s economy has faced multiple shocks, including state capture, sovereign credit rating downgrades, the Covid-19 pandemic, and grey listing by the Financial Action Task Force (FATF) in 2023.
“Faced with this crisis, we chose not to be defined by it. Instead, we turned it into a catalyst for change,” said Godongwana.
The government adopted a reform strategy built on three core principles: stabilising debt, investing in infrastructure, and improving the quality of public spending.
According to the Minister, these efforts are beginning to produce results. The consolidated budget deficit has narrowed to 4.5% of GDP for the 2025/26 financial year, improving from the 4.8% projection made in the 2025 Budget.
The deficit is expected to fall further to 4% in 2026/27 and 3.1% in 2027/28.
Government debt is projected to stabilise at 78.9% of GDP in 2025/26, before gradually declining. National Treasury expects gross debt to fall to 77.3% of GDP in 2026/27 and 76.5% by 2028/29.
The Minister noted that the slightly higher debt peak this year reflects weaker nominal GDP growth and government’s decision to take advantage of strong investor demand by increasing bond issuance.
South Africa has also achieved several key financial milestones over the past year. These include being removed from the FATF grey list, securing its first credit rating upgrade in 16 years, and benefiting from lower borrowing costs.
These developments have helped create more space for economic growth and investment.
Stronger Tax Performance
Government revenue has also performed better than expected. Gross tax revenue for 2025/26 has been revised upward by R21.3 billion, reaching an estimated R2.01 trillion.
This improvement was driven by stronger collections from VAT, corporate income tax and dividends tax.
Despite weak economic growth, South Africa has benefited from higher global commodity prices, particularly gold and platinum, which boosted tax collections.
As a result of the stronger fiscal outlook, government withdrew the R20 billion in additional tax increases that had been proposed in the 2025 Budget.
“The improving fiscal position allows us enough room to withdraw the proposed tax increases without putting fiscal sustainability or economic activity at risk,” said Godongwana.
Growth Outlook Improving
The growth outlook is also showing signs of improvement. National Treasury expects the economy to expand by 1.6% in 2026, slightly higher than the 1.4% growth forecast for 2025.
Over the medium term, economic growth is expected to average 1.8%, reaching 2% by 2028.
In addition, personal income tax brackets and medical tax credits will be fully adjusted for inflation after two years without relief, while several other tax thresholds will also be increased to help support households and small businesses.
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