raymondparson

MEDIA STATEMENT · 21 OCTOBER 2026

Prof Raymond Parsons
Economist, NWU Business School, North-West University

Commenting on the important 2026 Medium Term Budget Policy Statement (MTBPS) presented to Parliament today by Finance Minister Enoch Godongwana, North-West University Business School economist Prof Raymond Parsons says:

‘Given the changed global and domestic economic circumstances since the beginning of 2026, the 2026 Medium-Term Budget is a realistic, positive, and credible approach to a still challenging economic and fiscal situation. The MTBPS’s broad message was confidence-building. It confirmed that, despite the global energy crisis, the recent modest economic recovery had been disrupted and delayed, rather than definitively derailed.

The MTBPS reaffirmed South Africa’s commitment to stabilizing debt ratios and protecting the primary budget surplus that provides the predictability that bond markets and credit rating agencies require. Yet while the primary surplus represents a commendable milestone in fiscal constraints, it now serves more as a defensive shield against a tougher economic climate than as a springboard for much stronger inclusive growth.

Positive aspects of the Medium-Term Budget therefore included its emphasis on infrastructure development, local government, and broader partnerships with the private sector. In particular, the attention given to support municipalities in building capacity, strengthening governance, and aligning local budgets with developmental priorities has loomed large in MTBPS. The latest RMB/BER business confidence index saw the local government elections on November 4 as key to boosting confidence for the rest of the year, but flagged concerns about municipal service delivery, poor infrastructure, and policy uncertainty as important determinants.

Although fiscal discipline must stabilize the public debt, only a much higher job-rich growth outlook can meaningfully reduce it. The MTBPS’s reduced GDP growth forecasts for 2026 and beyond are therefore a concern. Breaking out of the narrow 1-2% growth corridor now requires an uncompromising pivot to supply-side reform measures, even if they involve structural reform risk. Effective reform implementation requires the policy to throw its weight behind a clearer, assertive timetable for the implementation of key reforms.

The decision to give further temporary relief to business and consumers from higher fuel costs is welcome, especially as windfall revenue has made this possible. The September 2026 CPI figures confirm the continued role of rising transport costs and fuel price pressures. Nonetheless, it remains essential that the overdue commitment to review and streamline the existing formula for fixing fuel prices monthly should be expedited to create more future flexibility regarding the fuel price mechanism.

Looking ahead to the main budget in February 2027, the fiscal policy must continue to act as a catalyst, shifting the focus from stability to faster job-rich growth. Although structural reforms are moving in a positive direction, the MTBPS recognizes that the economy is still growing far too slowly. Weak growth will undermine the fiscal trajectory. What South Africa now needs from the right policies, including help from future fiscal policy, is a GDP growth rate that outpaces interest spending and debt ratios’