• The 2026–27 budget targets 2% growth by 2028 through reforms and infrastructure spending.

• More than $61 billion is planned for transport, energy, and water projects.

• The strategy unfolds under high debt, weak growth, and 31.4% unemployment.

After years of sluggish expansion, South Africa is aiming to lift economic growth to 2% by 2028.

Presented on February 25 in Cape Town, the country’s 2026–27 budget lays out a strategy built on structural reform, infrastructure investment, and fiscal discipline, as the recovery remains fragile.

Growth is projected at 1.6% in 2026. To move beyond that pace, authorities say they must tackle deep structural constraints. “Persistent logistics bottlenecks, weak public infrastructure and the recent outbreak of foot-and-mouth disease continue to weigh on economic activity and pose risks to the outlook,” Finance Minister Enoch Godongwana said. “Our efforts to promote faster economic growth continue to revolve around the four pillars: Maintain macroeconomic stability, Implement structural reforms, Invest in growth-enhancing infrastructure, and Build state capacity.”

A Push to Unlock Investment

At the center of the plan is a large-scale push to boost productive investment. Pretoria intends to inject more than 1 trillion rand (about $61.9 billion) into infrastructure over the coming years, with priority given to transport, energy, and water systems.

The aim is to modernize roads, rail lines, ports, and electricity supply networks in order to ease trade flows and reduce long-standing logistics bottlenecks that have weighed on exports and business confidence.

As part of this effort, 63 projects are currently being developed in partnership with the private sector, including upgrades to border posts and other critical infrastructure. Authorities are also relying on the Budget Facility for Infrastructure, which since 2025 has approved more than 21.9 billion rand in funding for five major projects.

The urgency reflects a decade of weak performance. Over the past ten years, South Africa’s growth has averaged below 1%. While a modest pickup is expected in 2025 and 2026, it remains far from enough to address structural unemployment, which stood at 31.4% in the fourth quarter of 2025. Since 2019, the country has ranked among the most unequal in the world.

Fiscal Constraints and Debt Pressure

Public finances remain under strain. The International Monetary Fund has highlighted the continued weight of public debt, which exceeds 79% of GDP, while noting that fiscal space remains limited. The IMF has urged faster structural reforms to support growth and stabilize the debt trajectory.

“The 2026 budget will play a crucial role in achieving these objectives. The authorities will need to meet their primary budget surplus target of 1.5% of GDP,” the IMF said. It added that this would require credible reforms, including controlling the public sector wage bill, improving efficiency and transparency in public procurement, maintaining strict oversight of state-owned enterprises, and strengthening administrative effectiveness by eliminating inefficient or redundant programs.

A Strong Social Focus

Despite fiscal pressures, the government is maintaining a strong redistributive stance. More than 60% of non-interest spending — over 1.6 trillion rand out of a projected 2.67 trillion rand — is allocated to the “social wage,” which includes education, health care, and social protection.

Education remains a priority. About 22.7 billion rand is allocated to basic education to cover recurring costs, with early childhood development receiving a large share of the funding. An additional 12.8 billion rand is earmarked to expand access to preschool.

In health care, 26 billion rand is dedicated to fighting HIV/AIDS, while 21.3 billion rand is set aside to strengthen the medical workforce in a system that regularly faces pressure.

Local governments will receive 86.9 billion rand to ensure the delivery of essential services — water, electricity, and sanitation — to more than 11 million households. These transfers come alongside governance reforms aimed at improving local management.

These budget choices come as South Africa’s fiscal deficit has gradually narrowed in recent years, reflecting the government’s effort to balance economic recovery, macroeconomic stability, and the gradual consolidation of public finances.

Carelle Tahou (Intern)