South Africa’s public finances are improving after more than a decade of deteriorating fiscal conditions, but the country must now turn that progress into stronger economic growth, according to a lobby group, Business Leadership South Africa (BLSA).

BLSA chief executive Busisiwe Mavuso said in her weekly newsletter that Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS), which is being presented tomorrow, is expected to confirm that government debt peaked last year and has begun to decline relative to the size of the economy.

South Africa’s debt-to-GDP ratio increased from below 30% in 2008 to approximately 79% in 2025, contributing to rising borrowing costs, credit rating downgrades, and declining business confidence.

However, Mavuso said improved fiscal discipline, stronger revenue collection, and reforms to state-owned enterprises have fundamentally improved the country’s financial position.

Fiscal discipline

According to Mavuso, the National Treasury has successfully contained government spending by enforcing expenditure ceilings, limiting increases in public sector compensation, and directing unexpected revenue towards debt reduction rather than permanent spending commitments.

These measures have helped restore investor confidence, reducing the premium demanded by investors holding South African government bonds.

The stronger rand has also reduced the cost of servicing foreign currency debt.

Mavuso expects further progress on a proposed fiscal rule that would impose more permanent constraints on government spending and reduce the risk of another debt crisis.

Improving finances at state-owned enterprises have also helped. Eskom has returned to profitability, while Transnet recently reported an annual profit, although the latter was supported by once-off asset sales.

South African Airways, the Post Office, and the South African Broadcasting Corporation remain financially troubled, but the frequency of major government bailouts has declined.

The improvement in public finances has already contributed to credit rating upgrades by S&P and Fitch, with Mavuso expecting further positive rating action.

Lower government borrowing costs could also reduce financing costs for businesses and encourage private investment.

The Common Sense also wrote about South Africa’s improving fiscal position today, ahead of the mini-budget. This newspaper expects the National Treasury to hold the line on fiscal discipline, with government debt having peaked, or being close to its peak, despite weaker than anticipated economic growth.

Growth remains weak

Despite the fiscal improvements, Mavuso warned that South Africa’s persistently weak economic growth remains the greatest obstacle to sustained financial recovery.

The economy is expected to expand by barely 1% in 2026, limiting the government's ability to increase revenue through economic expansion.

Recent revenue gains have instead been supported by stronger commodity prices and improved tax collection.

Mavuso said reforms in electricity, telecommunications, and logistics have created opportunities for stronger growth, but these improvements must now translate into increased investment and economic activity.

Government infrastructure investment also remains a concern. Despite more than R1 trillion being budgeted, actual spending has repeatedly fallen short of allocations.

Mavuso called for greater support to government departments and municipalities to ensure infrastructure projects are implemented successfully.

Local government finances remain another significant risk, particularly because municipal financial difficulties affect Eskom's balance sheet and service delivery.

However, Mavuso said South Africa is entering the next phase of its economic reform programme from a considerably stronger fiscal position, providing an opportunity to shift the focus towards investment, job creation, and faster growth.