Godongwana cuts growth forecast to 1.2% as fuel levy relief returns to shield households from oil shock

Finance Minister Enoch Godongwana has cut South Africa’s growth forecast for 2026 to 1.2%, down from the 1.6% projected in February, as a Middle East conflict and higher oil prices weigh on an economy already losing momentum.

Delivering the Medium-Term Budget Policy Statement in Parliament on Wednesday afternoon, Godongwana said global growth is now estimated at 3.1% for 2026, down from 3.3% projected in January, after the closure of the Strait of Hormuz disrupted oil supply and pushed up food and energy prices. Borrowing costs, including South Africa’s, have risen as a result.

Growth is expected to reach 1.6% in 2027 and 2% by 2029. The minister was blunt about the starting point. “But, growth remains too low,” he said, adding that if government stays the course, growth could exceed 3% a year.

For households, the most immediate measure is a second temporary fuel levy relief. Godongwana said the rebuilding of fiscal buffers puts government in a stronger position to respond to the global cost-of-living squeeze, “including by providing temporary fuel levy again”. He did not attach a figure or a duration to the relief in the speech.

On the fiscal position, the minister said debt as a percentage of GDP is now falling, a turn he said government had consistently forecast for 2025/26. All three major global credit rating agencies have announced positive rating actions on South Africa this year, he said. The improved fiscal space, in his account, allows government to protect frontline services and preserve the jobs of teachers, doctors and nurses while protecting the social wage.

Godongwana used the occasion to propose a new set of fiscal guardrails to strengthen discipline, improve accountability and support responsible budgeting. The strategy rests on four pillars: maintaining macroeconomic stability, implementing structural reforms, building state capability and supporting growth-enhancing infrastructure.

On infrastructure, the Infrastructure Finance and Implementation Support Agency, IFISA, began operations on 1 April 2026 and is already supporting projects with a potential investment value of more than R217 billion. Of the 68 projects in the public-private partnership pipeline, 31 are municipal. Amended Municipal PPP Regulations have been submitted to Parliament for the required 30-day scrutiny period, the final step before implementation.

Fiscal support approved through the Budget Facility for Infrastructure now stands at more than R100 billion, and the infrastructure bond has raised over R14 billion since its first issuance in December 2025.

The minister also reported the findings of a review of infrastructure grants to provinces and municipalities. Between 2017/18 and 2023/24, national government transferred R887 billion through infrastructure conditional grants. The review found that while most funds are spent, projects are often delayed, incomplete or fail to deliver the intended benefits. Government is now reforming the grant system to tighten planning, accountability and oversight.

On the Credit Guarantee Vehicle, incorporated in August 2026 and now applying to the Prudential Authority for an insurance licence, Godongwana said development partners including the World Bank have provided conditional commitments of US$553 million towards its capitalisation. The vehicle is advancing towards being operational by 2027.

He tied the fiscal argument to the country’s recent milestones, 70 years since the Women’s March of 1956, 50 years since the Youth Uprising of 1976 and 30 years since the adoption of the Constitution in 1996, and said political freedom must be matched by economic progress. He also said additional resources are being made available to implement measures announced by the President in September to address crime and violence against women.

IOL published the speech in full on 21 October 2026.

The Medium-Term Budget Policy Statement sets the fiscal framework that governs spending ahead of the main February Budget. Its growth and debt projections are the numbers against which ratings agencies, lenders and municipal budgets plan, which is why a downward revision of four tenths of a percentage point matters beyond the chamber. Lower growth means less tax revenue, and less revenue means harder choices on the social wage and on the infrastructure spending the minister placed at the centre of his plan.