What will it take to put South Africa on a path to inclusive economic growth?
South Africa’s Medium Term Budget Policy Statement (MTBPS), to be presented on 21 October 2026, comes at a time of persistently low economic growth, high unemployment and declining industrial capacity. Against this backdrop, the National Treasury’s continued emphasis on fiscal consolidation and primary budget surpluses raises important questions about whether the current fiscal strategy can deliver the structural transformation needed to address the country’s development challenges.
In its latest briefing note, Coordinated macroeconomic policy for an uncertain world: A preview of the 2026 MTBPS, the Institute for Economic Justice (IEJ) argues that prioritising debt stabilisation through spending restraint risks undermining the very conditions needed for sustainable economic growth. Despite successive primary budget surpluses and improvements in South Africa’s credit ratings, economic growth remains weak, while the benefits of lower government borrowing costs have been limited.
The briefing note makes the case for a developmental fiscal strategy that places sustainable industrialisation, employment creation and socioeconomic development at the centre of macroeconomic policy. This includes diversifying exports, strengthening domestic production, increasing value addition in mineral and agricultural value chains, and reducing dependence on imported strategic resources. It also highlights the importance of adequately funding public services, strengthening state capacity and improving the effectiveness of government spending.
The IEJ further argues that fiscal, monetary and industrial policies must be better coordinated to support productive investment and inclusive growth. This requires expanding the resources available to government through progressive taxation, improving international tax cooperation and exploring alternative financing mechanisms that can support development without unnecessarily constraining future fiscal choices.
The 2026 MTBPS and the 2027 National Budget provide an opportunity to move beyond a narrow focus on fiscal consolidation towards a strategy that invests in South Africa’s productive capacity and its people. Such a shift is essential to building a more resilient economy, creating decent jobs and addressing poverty and inequality.