The PBO’s Reality Check: Is South Africa’s “Resilience” Real?
The Parliamentary Budget Office (PBO) says the picture of “resilience” painted by Finance Minister Enoch Godongwana in the Medium-Term Budget Policy Statement (MTBPS) isn’t real. Markets have welcomed the mini-budget, but the PBO points to negative per capita growth and crisis-level unemployment as the reality the country faces.
Who is the PBO?
The PBO is a unit within Parliament that provides independent, expert analysis of the national budget and fiscal policy. It supports Parliament’s oversight role with unbiased, evidence-based research on socio-economic conditions and the impact of fiscal choices. In its post-MTBPS presentation, it acknowledged the improvements in the country’s finances, but tempered the good-news angle with a strong dose of caution.
The core criticism
The PBO’s central argument is that Treasury is conflating positive financial measures with improved fundamentals. In its words, the MTBPS mistakes the budget surplus and a recently improved risk premium for economic resilience.
It also says that the talk of improved sentiment and budget surpluses obscures underspending in critical areas such as basic services and social security.
Where the risk premium improvement really comes from
According to the PBO, the improvement stems from bond flows rather than domestic strength:
- Sovereign risk premiums in many emerging markets have improved because global fund managers have sold off developed-country government bonds.
- For South Africa specifically, the PBO says local bonds are not a safe long-term investment for those managers. It calls them short-term, speculative carry trades that are profitable because of the Reserve Bank’s commitment to high real interest rates.
That means the improvement could reverse if global conditions change.
Fiscal consolidation under scrutiny
The PBO also questions the “resilience” story in light of the fiscal consolidation policy it says has been in effect since 2012. The idea was that consolidation would boost business sentiment, investment and growth. The PBO says it has instead:
- Restricted expenditure
- Created backlogs in infrastructure development
- Contributed to under-resourcing of government at all levels
- Entrenched poor governance
Progress on structural reforms has been very slow, it says, and the growth model remains structurally fragile. As it put it, negative per capita growth and crisis-level unemployment is not resilience.
Missing the targets
The 2024-2029 Medium Term Development Plan (MTDP) set targets of 3% economic growth and unemployment below 28% by 2029/30. The PBO says Treasury is missing them:
| Measure |
MTDP target |
Outlook |
| Growth by 2029 |
3% |
At most 2.3% under MTBPS projections, if Operation Vulindlela goes well |
| Official forecasts (NT, SARB) |
3% |
2% in 2029 |
| PBO forecast |
3% |
1.8% |
| Unemployment |
Below 28% |
33.6% in the latest reporting period |
The PBO adds that aggregate demand remains weak and public investment is too low to drive structural transformation. It describes an economy that is extremely concentrated in market share and wealth, with high levels of financialisation, deindustrialisation and unemployment.
What the PBO wants Parliament to do
The MTBPS, it says, doesn’t explain how budget adjustments support the MTDP or the wider goals of the National Development Plan. The PBO urges Parliament to:
- Check how the budget aligns with the MTDP.
- Monitor actual savings and expenditure outcomes rather than short-term wins.
It argues that a sustainable growth path requires investing in resilience to multiple serious risks and crises, and warns that the cost of not raising spending on basic services and social security is likely to be very large in the medium term.
A fair reading
The PBO’s view sits alongside a more positive picture of falling debt ratios and possible credit rating upgrades. Both can be true: public finances can be stabilising while the economy underneath remains weak. The disagreement is over what the good numbers actually signal, and whether consolidation is a means to growth or a constraint on it.
The bottom line
The PBO’s message is that stronger bond markets and a budget surplus aren’t the same as a healthy economy. With unemployment at 33.6% and growth forecasts below target, it wants the focus to move from short-term wins to the fundamentals that determine whether South Africans are actually better off.
Source: Parliamentary Budget Office post-MTBPS presentation to Parliament, as reported in the original article.
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