Emerging Insight: South Africa trip – Inflation and political risk, we meet again

Research evidence excerpt

Emerging Insight: South Africa trip – Inflation and political risk, we meet again

his year. Perhaps some of the commodity-

linked revenues could offset revenue shortfalls associated with lower growth. June fiscal

data (corporate tax take) is likely to provide initial guidance on revenue performance.

The expenditure side is likely to be well contained. The wage agreements are locked in at

3.4% for fiscal 26/27. Social grants received a similar CPI-linked adjustment. Debt

servicing costs could increase given higher bond yields following the energy shock.

Nevertheless, the Treasury is likely to stick with its guidance on issuance – keep local

fixed rate bond supply unchanged and access the international markets during the fiscal

year to seek $2-3billion issuance.

Fiscal anchors: not a game-changer like the 3% inflation target

Our reading of various meetings with stakeholders is that little is happening in terms of

credible fiscal anchors in the near term. Treasury prefers a principle-based approach

whereby a new government designs its targets in line with fiscal sustainability. Other

players see fiscal rules as ideology that does not help SA achieve its development

mandates of reducing poverty, inequality and unemployment. In fact, they think fiscal

rules can worsen these challenges. There is no political capital to fight the introduction

of fiscal rules. While markets and investors see them as anchoring a firmer downward

trend in debt, they are unlikely to be pursued as hard numerical targets in the near term.

Treasury will still proceed with its process of consulting stakeholders and make further

announcements in the MTBPS. In our view, hard numerical targets that anchor fiscal

sustainability are unlikely to be introduced soon.

Rebasing GDP exercise due from July 2026