South Africa’s sovereign debt is set to stabilise for the first time in 17 years, Finance Minister Enoch Godongwana announced during his national budget speech on Wednesday, marking a potential turning point for Africa’s most industrialised economy after years of fiscal strain. The development coincides with a significant credit rating upgrade and a major boost in security spending, as the government projects modest economic growth.
Debt as a percentage of GDP peaked at nearly 80% in recent years, a record high that had constrained public finances. The medium-term fiscal framework now projects the debt ratio will ease to 77.3% in the 2026/27 fiscal year and decline further to 76.5% the following year. “For the first time in 17 years, debt will stabilise and it will continue to fall in the coming years,” Godongwana told parliament, framing the trajectory as a critical shift in fiscal policy after prolonged deterioration.
This fiscal pivot follows a period of significant external validation. In November, ratings agency S&P Global upgraded South Africa’s sovereign credit rating for the first time in over 16 years, citing improved policy predictability and fiscal consolidation efforts. Separately, the country was removed from the global money-laundering watchdog’s “grey list” in October, a status that had increased compliance costs and deterred some investment. Godongwana described these milestones as “signals of restored credibility, of renewed resilience,” suggesting an improvement in investor perception after years of stagnation and governance-related setbacks.
The fiscal plan is underpinned by a proposed total government expenditure of 2.67 trillion rand ($168 billion) for 2026/27. A notable allocation increase is directed toward peace and security, which will rise to 291.2 billion rand ($18 billion) by 2028. This funding will support the sustained deployment of the army alongside police in crime hotspots, addressing persistently high levels of violent crime—official data averages approximately 60 homicides daily. The security push reflects a government priority to improve public safety, which remains a top voter concern and a barrier to broader economic participation.
The minister’s projections anticipate real GDP growth of 1.6% for 2026, an improvement from recent anemic performance but still below the rate needed to significantly reduce unemployment or poverty. The debt stabilisation pathway relies heavily on controlling the public sector wage bill and improving revenue collection from state-owned enterprises, particularly the power utility Eskom, which has been a major fiscal drain.
The convergence of a stabilising debt trajectory, a credit upgrade, and targeted security spending outlines the government’s dual strategy: demonstrating fiscal discipline to reassure markets while responding to acute social pressures. Success will depend on the state’s capacity to maintain spending restraint and execute reforms, particularly in infrastructure and energy, to foster stronger, more inclusive growth. The budget signals a cautious optimism, but the path to sustained economic recovery remains narrow and contingent on consistent policy implementation.
