The downward revision to South Africa’s growth outlook for 2026 – from 1.6% in February to 1.2% in October – represented the main lowlight in a Medium-Term Budget Policy Statement (MTBPS) that was brimming with highlights.

The standout was the announcement that gross tax revenue for the 2026/27 fiscal year had been revised upwards by R17.1-billion compared with the February estimate, largely on the back of higher commodity prices.

The National Treasury is now forecasting that tax revenue will increase to R2.14-trillion this year and rise to R2.53-trillion in 2029/30. It has also made a R70.8-billion upward revision to its main budget revenue estimates over the next two years on the back of stronger-than-expected tax revenue projections.

The additional 2026/27 revenue allowed Finance Minister Enoch Godongwana to announce a R45.5-billion increase in expenditure compared with what he outlined in February.

As a result, the contingency reserve will be increased to R10-billion ahead of potential El Niño threats, while R20-billion has been ringfenced for the Budget Facility for Infrastructure, which is emerging as a key instrument for unlocking shovel-ready projects. There are also new in-year allocations for important commissions of inquiry, including the highly effective Madlanga Commission, and the South African National Defence Force.

Next was confirmation that a further R38.1-billion in savings has been identified for the coming three years, in addition to the R12-billion identified in the 2026 Budget – a significant development given how notorious government has become for inefficiency.

Then, after years of slippage, the National Treasury was able to confirm that debt had indeed stabilised at 78.4% of GDP last year as promised, adding credibility to its claim that it would decline further.

The main budget deficit, meanwhile, is poised to fall to 3.7% of GDP in the current year and decline to 2.5% in 2029/30, while the primary surplus is expected to reach 1.7% of GDP in 2026/27.

To embed these fiscal-management gains, Godongwana also initiated a legislative process for the integration of a principles-based fiscal anchor. The draft legislation eschews a rigid numerical rule to leave scope for much-needed budgetary flexibility. It should, nevertheless, make it more difficult for future administrations to preside over the type of fiscal deterioration that characterised South Africa’s recent past.

The proposal, which will be tabled in Parliament in 2027, will require the incoming Cabinet assembled following a general election to approve a fiscal plan that sets out its objectives, strategy, main assumptions and risks. Its credibility would be assessed by the Financial and Fiscal Commission, and the National Treasury would need to provide regular report-backs.

With such a fundamental improvement to the country’s fiscal management, the poor growth outlook is extremely disappointing. Yet without these foundations, it would be almost impossible to even contemplate a return to a higher growth path, particularly given the prevailing growth-sapping external environment of energy and trade shocks.

It is therefore essential to stay the fiscal course and resist the pull of despair or, worse, populism.