Finance minister highlights progress on debt, greylisting and investment

In his Medium-Term Budget Policy Statement (MTBPS) speech Finance Minister Enoch Godongwana detailed the promises kept over the past few years.

The focus now is on how to grow the economy faster and attract the investment needed to create jobs and improve the life of all South Africans.

“Two years ago, we committed to stabilising public debt in the current year and then begin reduce it. Despite a challenging environment of persistently low economic growth, we are on track to achieve this goal. We also committed to remove South Africa from the Financial Action Task Force grey list. We have delivered on this commitment in just two and a half years. This is thanks to collaboration across government departments, law enforcement agencies and the private sector. Exiting the grey list enhances South Africa’s attractiveness to investors and make it easier to do business with us,” Godongwana said.

These achievements have meant that the government bond yield curve has been lowered, the risk premium for owning South African government bonds has been reduced, so debt servicing costs have been cut. Eventually this should lead to an improvement in South Africa’s credit rating.

Foreign participation in domestic bond auctions has grown from 24.8% in April 2025 to 26.8% in September 2025.

The Treasury said this increased participation was supported by lower global risk aversion and improved sovereign risk perceptions, bolstering demand and lowering yields. During this period, credit rating agencies reaffirmed South Africa's sovereign ratings and outlook, citing progress on fiscal consolidation and stronger external balances.

This has already led to lower debt service costs as debt service costs in the current year will be R4.8 billion lower than estimated in the 2025 Budget, supported by lower interest rates, lower inflation and a stronger currency.

Although some promises have been kept, Godongwana said more needed to be done given the uncertain global economic outlook. In particular, he warned that although global equity markets have surged this year, driven in part by Artificial Intelligence (AI) related stocks and central bank rate cuts, but this rally carries the risk of sudden reversals.

“We continue to make progress in the implementation of the Africa Continental Free Trade Agreement to strengthen multilateralism and regional cooperation. Under the South African presidency of the G20, significant strides have been made to strengthen macroeconomic fundamentals of debtor countries, many of them African, to build a more prosperous region and continent to support faster trade,” Godongwana said.

Apart from boosting intra-African trade, Godongwana aims to slim down the civil service by eliminating ghost workers and boosting early retirement. In addition, the government will clamp down on the growing markets for illicit cigarettes and alcohol, which pose serious risk to public health and undermine compliant businesses.

“Each year, billions of rands in taxes go uncollected, funds that could have closed our revenue gap and avoided tax increases entirely. According to SARS, since 2020, government has lost around R40 billion in excise revenue to the cigarette black market. The same is true for illicit alcohol and fuel. Government is clamping down on this illegal trade. In the last six months, SARS suspended three licenses for non-compliant tobacco production,” he said.

To give credence to President Cyril Ramaphosa’s promise to turn South Africa into a vast construction site, Godongwana said that the Treasury have reconfigured the Budget Facility for Infrastructure (BFI) to run four bid windows annually instead of just one.

“Since the reconfiguration, the BFI has received 28 submissions and nine projects were accepted for detailed analysis. To raise the funding for these BFI projects, a new infrastructure bond will be launched soon to raise a minimum of R15 billion,” Godongwana said.

BUSINESS REPORT