Finance Minister Enoch Godongwana will deliver the Medium Term Budget Policy Statement (MTBPS)  in the National Assembly in Cape Town on Wednesday.

As the term indicates, it’s the National Treasury outlining its policy approach to government finances over the next three years, with a focus on revenue and expenditure performance in the current 2026/27 financial year.

Economists indicate that Treasury reports so far have shown higher-than-expected tax revenues coming into the fiscus, putting national departments on a better footing.

With major economic stress in terms of higher inflation and now higher interest rates, Economists say Treasury has been reporting healthy tax revenues coming in from multiple sources for the past six months, ranging from personal income tax, value-added tax and, importantly, company tax due, in large part, to some buoyant commodity prices.

They expect Godongwana to continue the mantra of fiscal consolidation, which includes debt stabilisation.

There is also an expectation that he may announce a so-called fiscal anchor.

Citibank Chief Economist Gina Schoeman says, “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, 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.”

Schoeman says, “That’s really the key here is that once we start to grow, if or when we start to grow a lot stronger, because of reforms in this economy, we then wouldn’t need such a fiscal anchor anymore because the growth itself would expand the revenue base and we wouldn’t have to wait for windfalls such as Corporate Income Tax Revenue just because commodity prices are performing. It would rather be entrenched growth creating sustainable revenue in South Africa.”

FUEL PRICES

The ever higher fuel prices, which are set to raise inflation even further, have resulted in some wondering whether Treasury might offer further relief, as they did in the second quarter of this year, by way of reducing the fuel levy again.”

PSG Chief Economist Johann Els says, “There is some room in the budget, significant tax revenue overruns in a wide variety of tax categories which could present some argument that there’s room to do more, but as they’ve done already. 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 because the budget continues to improve, we get a lower deficit, debt-to-GDP ratio peaking and coming off, those are all important benefits from the tax overrun.”

At a broader fiscal policy level, at its recent 15th Congress of South African Trade Union (COSATU) National Congress, the trade union federation was critical of what it termed the government’s continued neo-liberal policies, adding that these run counter to the needs of ordinary citizens on the ground.

Cosatu Deputy General Secretary  Gerald Twala said, “A political choice, not an economic decision, so it’s a choice in our country. 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.”

TAXATION

While the mid-term budget generally does not speak to specifics around taxation, some civil society groups continue to advocate for a wealth tax, with the burden being shifted away from the working class, struggling with the relatively high cost of living.

They argue that National Treasury needs to open itself up to other ideas.

Tax Justice Project (JPC) Officer Chloe van Biljon says, “I  think we’d just like to see an openness to thinking about tax policy, not just to say it’s at its limits, nothing needs to change, it’s progressive, leaving it alone. 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.”

Economists believe if National Treasury continues to hold the fiscal consolidation line, this will bode well for improved credit rating adjustments going forward, ultimately making the cost of capital cheaper for investment and development, which in turn, should help boost economic growth.

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