A glimmer of hope for SA?

The mid-term budget may go down as one of the best in decades. Not because government is taking a hacksaw to spending, or downscaling, or backpeddling on some of its fantasies like National Health Insurance.

There is a dawning sense in the government of national unity that SA is not Sweden and there’s only so free money for free stuff – like healthcare, education and tenders for pals.

Where’s the glimmer of hope? Firstly, that government is committed to an inflation target of 3% which will bring down borrowing costs (for itself and others).

A lower inflation target of 3% means interest rates may stay higher for longer, and growth may be sluggish for the first few years.

Also encouraging sign is the commitment to fight crime – yes, the grey listing guys are watching us, even though we’ve been removed from the naughty list – and to get some kind of order into municipal governance.

What’s not encouraging is an expected average growth of 1.8% a year for the next three years. That’s nowhere near where it needs to be to create jobs.

“The introduction of a procurement dashboard is another important move towards the transparency necessary to reduce corruption in the public and private sector,” notes the Banking Association of SA.

For the first time since 2008, government debt is expected to stabilise, and the country will post a primary budget surplus, meaning we’re funding core spending from tax revenue rather than new debt. That’s a important shift, showing that the fiscus is starting to live within its means, notes Jurgen Eckmann, Wealth Manager at Consult by Momentum.

The revised inflation target of 3%, alongside lower debt-service costs, shows an intent to create room for reduced borrowing costs over time - though in the near term, this tighter target may require interest rates to stay elevated for slightly longer.

Also encouraging is the Targeted and Responsible Savings (TARS) initiative, a government-led budget reform mechanism introduced by South Africa's National Treasury to enhance fiscal efficiency, eliminate waste, and redirect resources toward high-priority areas. A saving of R6.7 billion has already been identified through the scrapping or phasing out of low-priority programmes. Removing ghost workers from the public payroll and social grant fraud is also gathering steam.

That all looks and sounds good. Let’s see how this plays out. Government is famous for telling whoppers at budget time. But this time may be different.