MTBPS 2025: a budget for the markets but not for people and planet.
The Budget Justice Coalition reads the Medium-Term Budget Policy Statement (MTBPS) as a budget for markets and not for the people nor the planet.
A Lower Inflation Target with High Social Risks
A central element of the MTBPS is the decision to lower the inflation target to 3% , down from the target mid-point of 4.5% in the 3-6% range. National Treasury presents this as a measure intended to strengthen the country’s international competitiveness and enhance long-term stability. The coalition acknowledges the importance of price stability for sustainable growth; yet, a significant shift of this nature carries real risks in the short-term for households already struggling with food inflation, transport costs and high levels of indebtedness. A lower inflation target may require interest rates to remain higher for longer, when above-target inflation arises, which places strain on both families and government budgets. Moreover, this inflation may arise from factors beyond the state’s control such as global supply shocks, as well as domestic administered price increases in areas such as fuel, electricity and water. These drivers are not easily addressed through higher interest rates. When inflation is caused by these structural or cost-push factors, raising the repo rate becomes an ineffective tool that depresses domestic demand by making credit for households and businesses more expensive, without addressing the underlying cause of higher prices. The Minister’s speech did not make clear how this change will lead to better outcomes for people facing unemployment, hunger, unsafe communities and declining basic services. There is also no conclusive evidence that a lower inflation target leads to long-term economic growth, and no evidence that higher inflation (below 20%) is harmful for growth, particularly if it is accompanied by proportionally higher wage growth. As the Coalition noted in the recent Sunday Times op-ed, fiscal gains are meaningless if they do not improve the lives of the millions of people who are unemployed or living in poverty. For economic policy to be meaningful, the state must play a monetary and fiscal role that translates into better services, more opportunities and reduced hardship for households across the country.
Savings Measures Should Help, Not Harm Vulnerable Households
We remain concerned about the early implementation of the Targeted and Responsible Savings (TARS) process in light of the recent year’s of across the board cuts that even National Treasury acknowledges have been harmful. The Budget Justice Coalition supports the principle of an evidence-driven savings initiative that is guided by credible spending reviews and well-defined reform plans. However, some of the current reductions are not yet supported by sufficient detail, particularly in areas such as social protection where assumptions about fraud and overpayment remain the subject of debate. Available data suggests that the majority of social assistance fraud is committed by officials, not beneficiaries. Yet, the measures that are being intensified overwhelmingly target the poor. In fact, evidence from civil society and research institutions is clear: exclusion errors from grants are of a much greater scale than inclusion errors. That is, the number of people who should be receiving grants based on official criteria but aren’t is much higher than those who currently receive but shouldn’t — in the case of the SRD grant, for example, the exclusion rate is as high as 50%. The exclusions have severe consequences for individuals and families who rely on them, mainly to access food and other necessities. Treasury’s approach to want to restrict even more beneficiaries from receiving grants blatantly ignores the depth and scope of hunger in communities. We encourage the Treasury to strengthen transparency, consult stakeholders more actively and ensure that TARS does not inadvertently weaken essential programmes or reduce support to those who need it most.
In the Coalition’s submission to Parliament, the Budget Justice Coalition will call for a rights-based people and planet centred approach. This includes protecting social protection programmes, investing in health and education, rebuilding local and provincial capacity and supporting employment pathways that allow people to participate in the economy in ways that tackle climate change and biodiversity loss. These are not optional commitments. They are central to a more sustainable, resilient, inclusive and prosperous South Africa.
Placing South African communities at the heart of our economy
Our work with communities this year has highlighted ongoing concerns about access to basic services, healthcare, deteriorating school conditions, policing and road failures, youth unemployment and the rising cost of living. The MTBPS claims to prioritise the provision of water and sanitation, electricity and solid waste services to over 11,2 million households, but according to municipal data, only 2,8 million households receive free access, a number which has decreased significantly over time. The MTBPS also does not fully respond to the broader pressures shaping daily life, such as persistent poverty, widening inequality and high unemployment. The Minister highlighted progress on greylisting, infrastructure reforms and macroeconomic stability, but did not provide a clear plan for easing the immediate pressures that communities face in their schools, clinics, transport systems and local economies. At a time when confidence in public services is fragile, people need clearer signals that fiscal choices that recognise public services and infrastructure as an investment that will support household wellbeing and strengthen the public services they rely on.
The MTBPS doubles down on so-called “structural reforms” under Operation Vulindlela, designed to mobilise private finance through the Credit Guarantee Vehicle (CGV), blended finance, and public-private partnerships (PPPs). Operation Vulindlela is in the process of expanding to local government, but no evidence has shown that Phase I had a positive impact on economic growth, employment, or gross fixed capital formation. Instead, increased privatisation risks turning rights-holding citizens into clientele, making access to essential services increasingly elusive.
MTBPS just ahead of G20
The very priorities which South Africa has placed on the global multilateral agenda require commitment domestically. South Africa will shortly host the G20 Summit. Our Presidency’s G20 priorities include strengthening disaster resilience and response, ensuring debt sustainability, mobilising finance for a just energy transition and harnessing critical minerals for inclusive growth for sustainable development. Key focuses include Inclusive Economic Growth, Industrialisation, Employment and Reduced Inequality, Food Security, Cost of Capital, reforming the global financial architecture, strengthening the multilateral trading system, and fostering economic growth and financial stability. While South Africa has stewarded the principles of solidarity, equality and sustainability on a global level, our domestic politics requires a commitment to the same principles. . This moment has echoes of the 2025 February Budget speech and subsequent VAT hike debacle that coincided with the first G20 Finance Ministers and Central Bank Governors. A regressive tax policy decision that would disproportionately affect poor households was proposed domestically while our Presidency is championing equality between nation states and African intellectual sovereignty. Our leaders must walk the talk that they talk at the G20. In the world’s most unequal country there is no place for the intellectual bankruptcy that sees the Finance Ministry and Treasury thinking that austerity and unilateral tax policy decisions are desirable.
The Coalition encourages Parliament to engage the fiscal framework robustly and to ensure that the final Budget reflects the priorities of South Africa’s people. A credible budget is one that upholds rights, supports those in need and enables long-term development and a liveable planet. We look forward to working with Parliament and Treasury to advance that goal.
When the Budget Justice Coalition met ahead of the MTBPS, our members recognised that the public is shouldering persistent economic hardships. Under-utilised labour stood at 45%, poverty continued to affect over half the population, while median monthly wages, the monthly salary of those at or below the bottom 50% of earnings, stood at a meagre R5200 (in 2022). The National Treasury needed to make adjustments that better position our public finances to redress such hardships. And while the improved revenue outlook, stronger SARS performance and removal from the greylist could potentially translate into stabilised debt-servicing costs, a commitment to a 3% inflation target (with a 1% tolerance band), and cuts to high-impact social programmes may constrain the government’s ability to offer the clear, rights-based people and planet centred direction that many South Africans need at this moment.
For media enquiries:
To arrange interviews with BJC representatives, contact Clotilde Angelucci clotilde@youthcapital.co.za/ 0826815927
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ABOUT THE BUDGET JUSTICE COALITION:
The organisations that make up the BJC are: Alternative Information and Development Centre (AIDC), the Children’s Institute at UCT, Corruption Watch, Equal Education, Equal Education Law Centre, HEALA, the Institute for Economic Justice, Oxfam SA, Pietermaritzburg Economic Justice and Dignity Group, the Public Service Accountability Monitor, the Rural Health Advocacy Project, SECTION27, Ilifa Labantwana, Treatment Action Campaign, the Legal Resources Centre, Centre for Child Law, Youth Capital, 350.org, Open Secrets, Public Affairs Research Institute, Amandla.mobi, Black Sash, Green Connection as well as friends of the coalition.
The purpose of the Budget Justice Coalition is to collaboratively build people’s understanding of and participation in South Africa’s planning and budgeting processes – placing power in the hands of the people to ensure that the state advances social, economic and environmental justice, to meet people’s needs and wellbeing in a developmental, equitable and redistributive way.