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Finance Minister Enoch Godongwana will present South Africa’s Medium-Term Budget Policy Statement (MTBPS) tomorrow, against a backdrop of weaker economic growth, higher inflation, pressure on government expenditure, but unexpectedly strong tax collections.

Mainstream analysts expect the National Treasury to present a cautiously positive fiscal outlook, supported by stronger revenue collections, particularly from the mining sector following the rise in precious metals prices. This is despite an economic growth figure that is expected to come in somewhat below the February projections.

Below we set out the six key expectations ahead of Wednesday’s statement, comparing the mainstream outlook with our own.

1. Lower Economic Growth Forecasts

Mainstream analysts expect Treasury to revise down its February projection of 1.6% real GDP growth for 2026, reflecting weaker economic activity, subdued investment, and continued structural constraints.

The Common Sense expects growth to be revised down to between 1.0% and 1.2%.

To provide some context as to how weak that figure is, the chart below sets out South Africa’s GDP growth number since 1994 compared to the emerging-market average.

2. Better-Than-Expected Tax Revenue

Despite such a poor growth performance, analysts anticipate a revenue windfall, potentially exceeding R50 billion, driven largely by stronger commodity prices, especially gold, and improved mining-related tax receipts.

See, for example, the chart below that tracks gold, coal, and iron ore prices across the past 36 months.

The chart shows that gold has experienced a particularly strong bull run.

The Common Sense expects the mining revenue windfall to cushion some of the fiscal consequences of weaker economic growth.

3. A Potentially Smaller Fiscal Deficit

Mainstream analysts expect the 2026/27 fiscal deficit to hold near the February projection of 4.0% of GDP or even to strengthen towards 3.5%. The Common Sense expects the revenue windfall to allow Treasury to at least meet its February deficit projection or even come in slightly below it, which will be a very strong statement to markets about fiscal prudence in South Africa.

The chart below shows the deficit as a share of GDP since 1994, compared to the rate of economic growth. The Treasury has little choice but to make a strong statement on prudence given that at projected growth rates the deficit is already at nearly three times the rate of economic growth. If market confidence in the government’s commitment to reining that in slips, the consequences will be for yields to lift sharply and the rand to weaken.

4. Continued Primary Budget Surpluses

The primary budget surplus measures the difference between government revenue and expenditure before interest payments on government debt. Mainstream analysts expect Treasury to maintain its commitment to generating primary surpluses, with some forecasts suggesting an improvement from the February projection of 1.6% of GDP towards nearly 2%. That is very much in line with what The Common Sense is thinking. The chart below sets out the primary surplus/deficit since 1994.

The chart shows that South Africa recorded primary surpluses for much of the period to around 2008. It subsequently recorded over a decade of primary deficits. From around 2023, it pulled out of the deficit position and the minister may project increasing future primary surpluses.

5. A Cautiously Improving Debt Outlook

Mainstream analysts will be watching whether the Treasury can maintain its projection that government debt will peak at approximately 77.3% of GDP in 2026/27 before gradually declining. Stronger revenue could improve the debt outlook, although weaker economic growth and increased financing costs present risks.

The Common Sense expects the Treasury to show that government debt has peaked as a share of GDP. If that call is correct, it will be the strongest signal on prudence the Treasury could send.

The chart below sets out the debt-to-GDP ratio since 1994. Note the prudence of 1994 to 2008 and the recklessness thereafter to around the present, and now, the attempt to flatten the debt curve.

6. Limited New Tax Measures

Mainstream analysts do not expect significant new tax announcements, with the statement likely to focus instead on revised revenue projections, government spending, and fiscal consolidation. The Common Sense takes the view that South Africa’s tax-to-GDP ratio is already so high that further tax increases are likely to prove counterproductive, undermining economic activity and potentially reducing rather than increasing government revenue.

The chart below sets out what the state takes out of the economy annually in tax as a share of GDP.

As this newspaper argued last week further tax hikes would be self-defeating and trigger diminishing returns for the fiscus.

The Overall Outlook

The mainstream expectation is that Wednesday’s MTBPS will deliver better fiscal numbers than anticipated by more pessimistic analysts, even as South Africa’s economic growth outlook deteriorates.

The Common Sense expects the Treasury to present a fiscal consolidation story, with a lower growth forecast offset by stronger revenue collections, a fiscal deficit at or slightly below the February projection, a strong primary surplus, and evidence that the government debt burden has peaked.

Such an outcome would be encouraging for financial markets and could provide further support for government bonds and investor confidence.

However, a stronger fiscal position, let alone one arising from a tax windfall, should not be confused with a stronger economy. The underlying weakness in economic growth and private investment remains a key country risk factor, particularly given the uncertainty around the consequences of the country’s November elections.