End austerity to stimulate the economy

After almost two decades of chronically low GDP growth and a rising debt burden, finance minister Enoch Godongwana’s 2026 budget provided no evidence that the economy has turned the corner or that public debt will ever stabilise. From 2009 to 2025, South Africa had an annual GDP growth rate of 1.1%. We are heading for two decades of declining average living standards.

Over the same period, the number of unemployed people soared by 6.5 million to 12.4 million and the unemployment rate increased to 42.1%. South Africa has the second highest unemployment rate in the world. We cannot continue like this.

The primary objective of the budget is to grow the economy and create jobs, not to balance the books. A rising debt burden is a symptom of a broken economy. If we fix the economy the debt burden will take care of itself since it is a ratio that is measured as a percentage of the size of the economy.

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A national budget does not operate like a household budget. When the government spends R1 billion on a construction project, GDP grows by R1.9 billion, according to the 2024 budget. A portion of the higher GDP growth goes back to the government in the form of higher tax revenues.

A budget is not an abstract accounting exercise that is disconnected from the performance of the real economy. The 2026 budget blue-ticked the jobs crisis, since the Treasury only cares about debt and pleasing financial markets. The Treasury has forecast GDP growth of 1.6% in 2026, which is evidence that it does not believe that there is an economic recovery.

Since Treasury’s forecasts are always too optimistic the outcome will probably be lower. The Budget Review publication says: “Growth remains well below the levels needed to meaningfully reduce unemployment.” The economy created 21 000 jobs during 2025 but the Treasury has effectively canned the Basic Education Employment Initiative (BEEI), one of President Cyril Ramaphosa’s favourite programmes. The BEEI – part of the Presidential Employment Stimulus (PES) – is the largest youth employment programme in the country’s history.

Since inception in 2020, it has created 1.4 million work opportunities for teacher assistants and cost R26 billion. This is equivalent to 57.5% of the 2.5 million work opportunities that the PES has created. Mahfouz Raffee, a researcher at Equal Education found the details of the end of the BEEI buried in an obscure annexure to the budget documents.

“The BEEI’s budget has been slashed to R318 million in 2026-27 from R6 billion in 2021,” he says. How much longer must South Africans wait for an economy that works for them and creates jobs at scale? There was nothing in the budget that was transformative.

The revenue windfall was only R21.3 billion, despite soaring gold and platinum prices. This meant that threatened tax increases of R20 billion will not happen and there will be tax relief of R14 billion after tax brackets are adjusted for inflation.

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