The ACDP expects Finance Minister Enoch Godongwana to reduce the inflation target to 3%, down from the previous range of between 3% and 6% when he presents the Medium-Term Budget Policy Statement (MTBPS) on Wednesday, 12 November 2025. While a lower inflation rate should bolster the currency and lower long-term borrowing costs, interest rates may have to be kept higher for longer to keep the inflation rate at the 3% target. This will negatively impact consumers and possibly economic growth prospects.
We also expect lower than forecast economic growth figures. We expressed our reservations earlier this year when the minister expected economic growth for 2025/2026 to be 1.4% of GDP for 2025 (down from an initial projected 1.9%), 1.6% in 2026 and 1.8% in 2027. We now expect the minister to announce even weaker economic growth of 1.1% for 2025, 1.3% for 2026 and 1.8% for 2027.
This could result in revenue falling short of projections which will impact fiscal consolidation measures. On a positive note, we are expecting a commodity tax windfall due to increased corporate income tax and dividend tax collections from increased gold and platinum group metals (PGM) prices. This is unlikely, however, to equal the commodity tax windfall in 2021 (when revenue collections exceeded budget projections by more than R100bn). Any additional funds from such a windfall should be used for investment in infrastructure and reducing national debt rather than being used for short-term consumption spending. In addition, we also expect increased tax collection by the South Africans Revenue Services (SARS).
The ACDP trusts that this tax windfall and improved tax collection will reduce the deficit and avoid tax increases. We do not support tax increases given the financial pressures facing households and businesses and did not support the very contentious two per cent VAT increase proposed earlier this year. National Treasury had to back down, instead relying on other revenue measures, including an inflation-linked increase to the General Fuel Levy and ‘stealth taxes’ like bracket creep, as well as some spending cuts to balance the budget.
The ACDP remains concerned about the growing public debt, mainly due to slow economic growth. Earlier this year, South Africa’s consolidated budget deficit was expected to reach 4.6% of GDP, or R361.3 billion in the 2025/26 fiscal year. The growth of debt-service costs projected to reach R423.6bn this year crowds out spending to fund health, education and fighting crime and other urgent budget items.
When this year’s budget was presented earlier this year, global uncertainty was high, due to concerns about United States (US) President Donald Trump’s trade tariff hikes. However, the feared fall-out from the tariffs has been less severe than anticipated. South Africa has also benefited from concerns over the US dollar’s reserve currency status which have buoyed gold prices and increased South Africa’s exports. Regrettably, though South Africa has not yet concluded a trade deal with the US, and the African Growth and Opportunity Act (AGOA) expired on 30 September 2025 (although it is hoped that it will be extended for one year).
The ACDP believes sustainable economic growth must be accelerated for increased revenue and job creation and will be expecting updates on key growth reforms. While South Africa has made strong progress in reforming the electricity and logistics sectors, and has been removed from the Financial Action Task Force’s (FATF) greylist, both international and domestic investors still remain concerned about high levels of crime and corruption which limit economic growth prospects and impact other reform efforts. This particularly in light of KwaZulu-Natal Provincial Police Commissioner Lt Gen Mkhwanazi’s shocking revelations, and the further evidence in both the Madlanga Commission of Inquiry and the Parliamentary Ad Hoc Committee. We trust that these inquiries will expose criminal networks, corrupt politicians and officials and lead to a reformed criminal justice system. Only a significant improvement in the ability to apprehend and successfully prosecute those involved in corruption and fraud will result in investor confidence.
The ACDP is concerned that private sector fixed capital investment has slowed significantly with weaker business confidence resulting in businesses preferring to accumulate cash reserves (of more than R1.8 trillion) rather than invest in the country. We look forward to increased allocations for infrastructure development as well as an update on reforms to boost private investment in public infrastructure by improving project execution and investment planning at national, provincial and local government levels. This follows new public-private partnership regulations that took effect on 1 June 2025 which will enable greater private sector involvement in infrastructure delivery. We trust that relative political stability within the government of national unity (GNU) will also result in improved business confidence and increased private sector capital investment.
We also expect the minister to announce measures to improve basic service delivery issues, especially water infrastructure breakdowns. Water outages have become increasingly regular, particularly in South Africa’s economic hub of Gauteng and parts of KwaZulu-Natal. They threaten economic growth, besides resulting in service delivery protests by disgruntled communities. With local government elections in 2026, solving the water crisis will become increasingly crucial.
The ACDP also expects an update on the government spending review which is identifying programmes or projects that should be closed because they either yield poor outcomes or duplicate other efforts. In addition, the eradication of “ghost workers” in the public service will contribute significantly to reduce government expenditure. We also look forward to an update on the Voluntary Exit Programme in the public service, which seeks to stabilise the escalating public sector wage bill. This measure should not, however, come at the cost of service delivery due to the loss of skills and experience.
As far as social grants are concerned, National Treasury paid R35.6bn to 8.3-million beneficiaries in 2024/25, who received a Social Relief of Distress (SRD) grant of R370 per month. A North Gauteng High Court judgment declared several regulations for the SRD grant unconstitutional in January 2025, ordered government to eliminate numerous administrative barriers that had prevented about 10-million people from accessing the grant and to increase its value. Extending access to more than 18-million people and increasing its value to R450 a month to keep up with inflation would cost about R100bn — R65bn higher than what was paid in 2024/25. While government has appealed the judgement, National Treasury may replace the SRD grant with a new grant so that it does not have to implement the judgment.
The ACDP will be closely studying the MTBPS which comes at a crucial time for the country’s international credibility, shortly after having been removed from the FATF greylist. Taxpayers rightfully expect value for every rand spent by government, which has been sorely lacking in the past. They demand servant leaders who understand the principle of stewardship – that state funds are not there to be looted and stolen but are to be stewarded for the good of all citizens. We trust that the government of national unity (GNU) will start ensuring taxpayers receive value for money and the services they deserve.
