South Africa’s 2026 Budget: A Middle Ground Between Utter Pragmatism and Complete Denial

In his 2026 Budget Speech, Finance Minister Enoch Godongwana presented a gently optimistic outlook for South Africa centred around a slow improvement in the rate of economic growth.

The minister said that while the global economy is set to grow at 3.3%, South Africa was aiming for just less than half of that rate this year, with the growth number projected to improve modestly from 1.4% in 2025 to 1.6% in 2026, and 1.9% in 2027.

The lift in the outlook was cited as evidence that South Africa’s much-vaunted reform efforts were paying off. These reforms were cast as crucial for unlocking private investment and boosting South Africa’s economic capacity, especially in addressing persistent bottlenecks in rail and ports and securing a reliable electricity supply.

But at the heart of all that lay a now well-trodden South African contradiction: the repeated emphasis on structural reform processes read against a very low growth forecast.

There is something missing there. If the reforms are as pragmatic and progressing as quickly as claimed, then why is growth still just half the global average? Compare the number to the emerging market average, which is above 4%, and the contradiction is starker still.

The answer, of course, is obvious: the vaunted reforms are far too modest in extent to lift investment and growth levels much. What is needed is to stop taxing capital, replace race with merit and value in public procurement policy, throw ports and rail completely open to private management, burn lots more coal, recast expropriation laws to make explicit that property won’t be seized for less than market value, and strike massive new investment pacts with America and China. That would take the number to 3%-plus, and perhaps even 4%.

The minister and his government were, however, as sound as ever in managing the fiscal consequences of the low rate of economic growth.

The budget forecast a narrowing of the fiscal deficit, with the consolidated budget deficit expected to drop to 4.5% of GDP in 2025/26, improving further to 4.0% in 2026/27 and 3.1% by 2028/29.

The flip side of the fiscal coin, debt stabilisation, remains as impressive, with gross debt set to stabilise at 78.9% of GDP in 2025/26 before gradually declining to 76.5% by 2028/29.

It is hard to know what to make of all that.

The government is utterly pragmatic in facing the consequences of the low rate of growth forced by its many counterproductive policies. That pragmatism means, in practice, cutting back on social protection and infrastructure spending. That’s extraordinary coming from a minister whose party has lost an election.

The alternative, to spend more and drive up debt and the deficit, would of course crash the currency and the bond market. The minister knows that, of course (even his party issued a statement before the budget calling for fiscal consolidation). But for all that pragmatism, the government remains utterly in denial about the reforms needed to lift the rate of growth to emerging market levels. It must be quite unique to find both those attributes so starkly on display in one economy at a single moment in time. But that is the summary of it: a very odd middle ground between utter pragmatism and complete denial.