Finance Minister Enoch Godongwana's MTBPS: A boost for investors and economists

Property group, economists and trade union have reacted positively to the Medium-Term Budget Policy Statement (MTBPS) delivered by Finance Minister Enoch Godongwana on Wednesday.

Samuel Seeff, the chairman of the Seeff Property Group, said that the Medium-Term Budget Policy Statement (MTBPS) will provide some comfort to investors. “In particular, I welcome the news around public debt stability, and the potential to end on a primary surplus with a significant narrowing of the overall budget deficit.”

Seeff added that he welcomes the new initiatives aimed at targeting efficiency and waste reduction, and of course the grey list exit. “Also welcome  is the commitment to direct more resources towards infrastructure investments which could boost property values and development in areas receiving funding. A 1.2% growth rate would be welcomed, although not enough to really lift the economy and job creation; nonetheless, we would welcome that. We are also pleased that there are no immediate plans for further tax hikes, but remain of the view that property taxes are too high.”

Seeff said the acquisition costs in terms of transfer duty and capital gains tax, combined with the lack of economic growth, mean that fewer people are able to buy homes. “We see this reflected in the continued lower volume of transactions (despite the uptick flowing from the interest rate reductions this year), and particularly insofar as the reduction in the number of first-time buyers and notable increase in the age of buyers. A reduction in both of these taxes could boost affordability and property ownership growth. While we appreciate the move to lower the inflation target over the next two years as a strategy to bring down the interest rate, we remain of the view that the current rate is still about 50 bps too high, and a hindrance to the property market and economic spending.”

Seeff added that they are particularly disappointed that the Bank did not take the opportunity to provide a rate cut in September. “Inflation is still significantly lower compared to last year. Even at the lower target of 3-4% we believe that there is room for the Reserve Bank to seriously consider a rate cut next week, especially ahead of the annual busy retail season. Naturally, a further rate cut will immediately improve property affordability and stimulate activity in the residential property market by making mortgages cheaper, along with the general cost of credit, adding more money back into consumer wallets to spend in the economy.”

Nedbank Economics Group Unit said that National Treasury (NT) has reduced its GDP growth forecast for 2025 from 1.4% to 1.2% due to shrinking fixed investment, lower exports and government expenditure. “The forecasts for the next two years were kept broadly unchanged, with 2026 reduced from 1.6% to 1.5% and 2027 maintained at 1.8%. GDP growth is forecast to average 1.8% over the next three years, bolstered by a recovery in investment.”

Professor Waldo Krugell, an economist at North-West University, said that he is positive about the MTBPS. “The Minister mentioned quite a few things that economists wanted to hear. A big one is confirming the move to a 3% inflation target. Another is that they are considering a fiscal anchor.”

Krugell added that he also highlighted the progress being made with structural reform. “Add to this the extra revenue and some fiscal breathing room and it makes for a good mini budget. The turning point of the debt to GDP ratio is unfortunately again a bit higher, and we will have to wait and see how the credit rating agencies respond to our ratings outlook.”

Professor Raymond Parsons, a North-West University Business School economist, said that the broad economic and fiscal strategies outlined in the 2025 MTBPS are realistic and credible given South Africa’s challenging economic context. "The MTBPS represents a visible turning point in advancing the priorities of a stable, growing, competitive, and inclusive economy."

Matthew Parks, Parliamentary Coordinator for Congress of South African Trade Unions, said that the Federation welcomes recent positive achievements. “We are, however, concerned that the Treasury remains excessively focused on reducing expenditure, debt and deficits as well as achieving a narrow surplus at the expense of badly needed economic growth and job creation. We note the proposed reduction in the inflation target from 4.5% to 3%.”

Parks added that inflation is the enemy of workers who can least afford rising costs of living. “We are, however, deeply concerned that this will see the Reserve Bank continue to deny badly needed repo rate relief to millions of highly indebted working- and middle-class families and an economy badly in need of stimulus. More must be done to address the root causes of domestic inflation, namely the ever-volatile international oil price, and its resulting impact upon our fuel price regime as well as Eskom’s unsustainable dependence upon increasingly unaffordable above-inflation electricity price hikes. These are matters that the government must do far more to tackle to reduce inflation."

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