MTBPS expectations point to pump, price pressures

While finance minister Enoch Godongwana is widely expected to table a sound medium-term budget policy statement (MTBPS) at a fiscal level on Wednesday, unions, vulnerable households and those saving up for retirement are expecting active interventions for relief.

While progress has been made in stabilising debt and driving structural reforms to the economy, the cost of living shocks triggered by the US war with Iran, among other things, are amplifying calls for the National Treasury to provide more than just a balanced budget amid the financial squeeze on businesses and households.

The Institute for Economic Justice (IEJ) is calling for a decisive shift from spending restraint towards a coordinated set of macroeconomic policies that seek to create decent jobs, rebuild industrial capacity and strengthen public services provision.

“During the period of fiscal consolidation between 2013 and 2025, South Africa’s economy only grew by an annual average of 0.9%, while unemployment rose from 36.1% in early 2013 to 43.8% in 2026. These consistently poor outcomes demand a reassessment of South Africa’s fiscal strategy,” the IEJ said.

The IEJ said while the National Treasury will claim in the MTBPS that its fiscal strategy of ever-increasing primary surpluses is yielding results, the IEJ’s briefing note showed otherwise.

“In narrow terms, borrowing costs have hardly fallen, and the debt-to-GDP ratio is unlikely to have stabilised by the target date of 2027/28.”

The IEJ said National Treasury’s fiscal approach was underpinned by weak economic growth, hampered by the prevailing fiscal policy strategy and made more difficult in the current external environment of recurring crises.

IEJ researcher Liso Mdutyana said the fiscal strategy to achieve debt stabilisation through fiscal consolidation is insufficiently geared towards achieving sustainable and inclusive growth through structural transformation.

“Achieving a primary surplus is a fiscal milestone, but it is not a measure of whether people’s lives are improving. A budget strategy must be judged by whether it advances structural transformation, creates decent jobs and care infrastructure, strengthens public services, responds to climate catastrophes and builds sustainable productive capacities.”

The IEJ challenged the Treasury to table an MTBPS which strengthens resilience and policy coordination, supports industrial development, rebuilds public services, care infrastructure and mobilises resources more fairly.

Aside from concerns that elevated AI-related valuations might prove unsustainable, 2026 looked set to be a strong year for investors. Fast-forward to October and it feels like we are in a different world—  Hugh Hacking, Momentum Corporate

Matthew Parks, parliamentary coordinator for Cosatu, said MTBPS interventions must include rebuilding the state, stabilising local government, ramping up the fight against crime, a stimulus package for jobs and growth, strategic support for state-owned enterprises, price shock relief for workers and adjusting the Social Relief of Distress Grant for value lost to five years of no inflationary increases.

“This MTBPS cannot be business as usual, nor can we afford to continue to normalise the abnormal. Government must signal a bold shift to stimulate growth, rebuild public and municipal services, provide relief to workers and the poor, and give hope to the nation.

“It is time to end tried and failed neo-liberal austerity policies that have crippled growth. We must now invest to grow the economy and tackle unemployment. It is time for bold action,” Parks said.

Hugh Hacking, executive head of structured investments and annuities at Momentum Corporate, said that following the outbreak of conflict in the Middle East at the end of February, fuel prices jumped to record levels and investment markets have come under renewed pressure.

“Rising fuel prices have fed through to inflation, which in turn has led to two repo rate increases since the budget speech. As we head towards the MTBPS and the upcoming local elections, it’s worth reassessing your investment and retirement strategy to make sure it remains appropriate.”

Hacking said the February budget speech brought plenty of good news, with improving fiscal conditions and projected real GDP growth of 1.6% for 2026. The JSE peaked at around 129,000 points in February and inflation was right on target at just over 3%.

“Aside from concerns that elevated AI-related valuations might prove unsustainable, 2026 looked set to be a strong year for investors. Fast-forward to October and it feels like we are in a different world.”

Hacking said fuel prices have risen to record highs, placing consumers and businesses under significant pressure and contributing to higher inflation, with headline consumer price index reaching 4.4% in August.

“In response, the Reserve Bank has raised the repo rate to 7.25%, adding further pressure, while GDP growth projections are now down to 1%. However, amid the negativity around fuel prices, it’s easy to overlook some positive developments. We expect the finance minister to announce a tax windfall, driven by higher metals prices and improved tax collection.”

Hacking said he expected the minister to announce a so-called “fiscal anchor”, a legal framework that limits the government’s ability to add excessively to the debt burden, and added that a stronger fiscal position will be welcomed by credit rating agencies.