South africa: South Africa remains on course to meet its fiscal targets despite the economic uncertainty created by the recent conflict in the Middle East, National Treasury Director-General Duncan Pieterse said on Monday. Speaking at the Citi Emerging Markets Macro and Credit Conference, Pieterse highlighted that the country's public finances had reached a turning point after the February 2026 Budget, which saw government debt stabilize relative to GDP for the first time since before the 2008 global financial crisis.
According to South African Government News Agency, Pieterse stated that South Africa had achieved a third consecutive primary budget surplus, showcasing the government's ability to meet fiscal consolidation targets and structural reform commitments. He emphasized that delivering on fiscal objectives through economic cycles, especially during stress periods, is crucial for fiscal credibility.
Pieterse's comments followed the escalation in Middle East conflict shortly after Finance Minister Enoch Godongwana tabled the national Budget, raising concerns about rising energy prices impacting the economy and public finances. He mentioned that recent assessments by major credit rating agencies had reinforced confidence in South Africa's fiscal trajectory. Moody's revised South Africa's outlook to positive, while S and P Global Ratings reaffirmed its positive outlook after upgrading the country's sovereign rating in November 2025.
Pieterse noted that both agencies expect South Africa's debt burden to decline over the next three years, supported by ongoing structural reforms boosting economic growth. He highlighted that South Africa is currently the only G20 country with a positive outlook from Moody's and one of two G20 countries with a positive outlook from S and P.
The Treasury reported stronger-than-expected fiscal outcomes for the 2025/26 financial year. The primary surplus reached 1.1% of GDP, exceeding the budget estimate of 0.9%, with the main budget deficit narrowing to 4.3% of GDP compared to the projected 4.6%. Government debt is anticipated to decline over the medium term, and the main budget deficit is forecasted to drop to 3.1% by 2029.
Pieterse announced the introduction of a formal fiscal rule during the Medium-Term Budget Policy Statement in October to strengthen debt reduction and primary surplus objectives. In response to rising fuel prices linked to the Middle East conflict, the government introduced temporary fuel levy relief from April to June, costing R17.2 billion. Pieterse assured that this measure would be fiscally neutral, funded by fiscal outperformance from the previous financial year.
The Treasury also reported continued revenue strength at the start of the new financial year, with tax collections in April exceeding budget forecasts by R5.9 billion, representing annual growth of 10.1%. Government spending remains largely insulated from inflationary pressures, with the public-sector wage agreement fixed until the 2027/28 financial year. Social grant spending is projected to be around R2 billion below expectations due to improved beneficiary verification processes.
Pieterse detailed improved debt dynamics, with government debt expected to peak in 2025/26 before declining to 76.5% of GDP by 2028/29. South Africa's borrowing costs have decreased, with domestic government bond yields declining by an average of 240 basis points between the 2025 and 2026 Budgets and five-year Eurobond spreads narrowing significantly.
Regarding state-owned enterprises, Pieterse noted Eskom's progress towards profitability, with a R16 billion profit in 2025 and R24.3 billion in the first half of 2026. Transnet remains loss-making but shows signs of recovery, with increasing freight volumes and narrowing losses. Existing guarantees are deemed sufficient to meet Transnet's financing needs.
Discussing the broader economy, Pieterse highlighted improvements in South Africa's medium-term growth outlook due to structural reforms. Economic growth accelerated during the second half of 2025, with GDP expanding by 1.1% for the year. Fixed investment has also rebounded, with two consecutive quarters of growth recorded in 2025.
Agricultural exports increased by 11% in early 2026, driven by higher export volumes and improved prices. Pieterse acknowledged concerns about fertiliser supply and prices due to the Middle East conflict, but expressed confidence in South Africa's ability to diversify import sources.
Pieterse pointed out progress in energy reform, with NERSA registering over 19 gigawatts of new generation capacity. The National Transmission Company of South Africa is managing 24 gigawatts of projects seeking grid connections over the next six years. Plans to establish an independent transmission system operator and implement a wholesale electricity market are advancing.
In logistics, private-sector participation is expanding. The 25-year concession for Durban Container Terminal Pier 2 began operations in January, and 11 train operating companies have been selected to operate on 41 routes across six freight corridors. Government infrastructure spending is set to grow nearly 10% annually over the medium term, focusing on passenger rail investments.
The Treasury has approved R104 billion in infrastructure projects through the Budget Facility for Infrastructure and raised R11.8 billion via its first infrastructure bond in December 2025. Pieterse emphasized municipal reform as a key focus, with the Metro Trading Services Reform programme backed by R54 billion to improve municipal finances and infrastructure investment.
Despite global uncertainty, Pieterse reiterated the government's commitment to reducing debt and strengthening economic growth. 'We are not yet where we want to be and more work lies ahead, especially in the current global environment. But we are on track to get there,' he concluded.