Finance posse: Finance Minister Enoch Godongwana on his way to deliver the 2026 Budget, is seen in this traditional walk with, among others, Reserve Bank Governor Lesetja Kganyago
and SARS Commissioner Edward Kieswetter. Photo GCIS
After almost two decades of chronically low GDP growth and a rising debt burden, finance minister Enoch Godongwana’s 2026 budget provided no evidence that the economy has turned the corner or that public debt will ever stabilise.
From 2009 to 2025, South Africa had an annual GDP growth rate of 1.1%. By the end of 2025, GDP per capita will be lower than it was in 2007.
We are heading for two decades of declining average living standards. Over the same period, the number of unemployed people soared by 6.5 million to 12.4 million and the unemployment rate increased to 42.1%. South Africa has the second highest unemployment rate in the world. We cannot continue like this.
The primary objective of the budget is to grow the economy and create jobs, not to balance the books. A rising debt burden is a symptom of a broken economy. If we fix the economy the debt burden will take care of itself since it is a ratio that is measured as a percentage of the size of the economy.
A national budget does not operate like a household budget. When the government spends R1 billion on a construction project, GDP grows by R1.9 billion, according to the 2024 budget. A portion of the higher GDP growth goes back to the government in the form of higher tax revenues. A budget is not an abstract accounting exercise that is disconnected from the performance of the real economy.
The 2026 budget blue-ticked the jobs crisis, since the Treasury only cares about debt and pleasing financial markets. The Treasury has forecast GDP growth of 1.6% in 2026, which is evidence that it does not believe that there is an economic recovery.
Since Treasury’s forecasts are always too optimistic the outcome will probably be lower. The Budget Review publication says: “Growth remains well below the levels needed to meaningfully reduce unemployment.”
The economy created 21 000 jobs during 2025 but the Treasury has effectively canned the Basic Education Employment Initiative (BEEI), one of President Cyril Ramaphosa’s favourite programmes.
The BEEI – part of the Presidential Employment Stimulus (PES) – is the largest youth employment programme in the country’s history. Since inception in 2020, it has created 1.4 million work opportunities for teacher assistants and cost R26 billion. This is equivalent to 57.5% of the 2.5 million work opportunities that the PES has created.
Mahfouz Raffee, a researcher at Equal Education found the details of the end of the BEEI buried in an obscure annexure to the budget documents. “The BEEI’s budget has been slashed to R318 million in 2026-27 from R6 billion in 2021,” he says.
How much longer must South Africans wait for an economy that works for them and creates jobs at scale?
There was nothing in the budget that was transformative. The revenue windfall was only R21.3 billion, despite soaring gold and platinum prices. This meant that threatened tax increases of R20 billion will not happen and there will be tax relief of R14 billion after tax brackets are adjusted for inflation.
More than five years after the Treasury launched Operation Vulindlela in October 2020 to implement structural reforms – code for the privatisation, deregulation, liberalisation and the withdrawal of the state from electricity, transport and water – the results do not show in the official statistics.
If Vulindlela has been such a success, why have there been two consecutive years of declining gross fixed capital formation (GFCF), a measure of total investment?
According to the Budget Review, GFCF declined by 3.9% in 2024 and an estimated 2% in 2025. If one cuts through the smoke and mirrors of reported public sector spending of R1.1 trillion on infrastructure, the public sector investment strike since 2014 will continue for three more years during the 2026 medium term expenditure framework (MTEF) period until 2029.
Public sector infrastructure spending will increase by only 0.4% a year. After considering inflation and population growth, there will be a decline in real (after inflation) per capita spending . From 2014 to 2024, real per capita public investment collapsed by 40%.
Public investment will decline from 4.5% of GDP to 3.9% of GDP. The shortfall to achieve the National Development Plan’s target of 10% of GDP for public investment is R1.4 trillion over the next three years.
During the 2026 MTEF period main budget revenues will increase by 5.6% a year. Non-interest spending will increase by 3.6% a year. The difference between the two lines is the primary budget surplus, the budget deficit excluding interest payments.
According to the Treasury’s kindergarten economics, the primary budget surpluses of R507 billion over three years will stabilise the debt. But this is spare change within the context of a debt juggernaut of R6.1 trillion that will grow each year on the back of a borrowing requirement of R1.4 trillion and interest payments of R1.4 trillion.
The Treasury says debt has stabilised at 78.9% of GDP. But every budget since austerity started in 2012 has said that it will stabilise the debt within the next two or three years.
The 2012 budget said: “As the economy recovers and fiscal consolidation proceeds, government borrowing will moderate, with debt projected to peak at 38.5 per cent of GDP in 2014/15.” Every year since then, the Treasury has missed its targets and not delivered on annual promises to stabilise debt.
The 2023 budget said debt would stabilise at 73.6% of GDP in 2025-26. The 2024 budget said debt would stabilise at 75.3% of GDP in 2025-26. The 2025 budget said debt would peak at 76.2% of GDP in 2025-26.
Basically, each year the Treasury was overestimating the positive impact of its structural reforms on GDP growth and underestimating the damage the austerity policies were inflicting on the economy.
In its latest report that was released on 11 February, the IMF does not believe that the debt will stabilise. It has forecast that the debt ratio will increase to 84.2% of GDP by 2031.
The IMF says a primary surplus of 3% of GDP is required to bring down the debt to 70% of GDP by 2034. But again this strategy would destroy the economy and increase the debt ratio. The Treasury and the IMF should listen to what the great economist John Maynard Keynes said in a radio interview in 1933: “You will never balance the Budget through measures that reduce national income.
The chancellor would simply be chasing his own tail – or cloven hoof! It is the burden of unemployment and the decline of national income which are upsetting the budget. Look after unemployment and the budget (looks) after itself.”
By definition, chronically low GDP growth so long means that there is not enough demand or spending power in the economy. Since the private sector has so much spare capacity and cannot invest in a collapsing economy where people do not have the money to buy the things it can produce, the government must end austerity and stimulate the economy.
Duma Gqubule is a financial journalist, analyst, researcher and adviser on issues of economic development and transformation.