Government’s Fiscal Position Improves

South Africa’s national government revenue improved during the first three months of the 2026/27 financial year, while new multilateral financing has helped government meet its foreign-currency borrowing needs on favourable terms.

Revenue reached R241.5 billion in June 2026, up from R212.7 billion a year earlier. For April to June, cumulative revenue increased to R505.6 billion, compared with R454.1 billion in the same period of 2025. Expenditure came to R161.4 billion in June and R503.6 billion for the quarter, leaving government with a small cumulative surplus at the end of June.

The fiscal position has also benefited from a US$1.5 billion Development Policy Loan signed with the World Bank. The 15-year loan includes a three-year grace period and carries interest at six-month SOFR plus 1.35%. Together with financing from other multilateral development partners, this has allowed government to meet its full US$3.2 billion foreign-currency borrowing requirement for 2026/27.

The funding is tied to reforms in electricity, freight and logistics, and water and sanitation. These measures are intended to ease infrastructure bottlenecks, improve competitiveness and build a stronger base for inclusive growth and jobs.

That said, the South African Reserve Bank’s July assessment makes it clear that the economic environment remains challenging. First-quarter growth was better than expected, at close to 2% year-on-year, but it was driven by net exports rather than domestic demand. Growth is expected to slow in the second and third quarters as consumer and business confidence soften and uncertainty continues to affect investment.

The Reserve Bank also flagged municipal dysfunction as an increasingly serious constraint on growth. Its view is that South Africa’s longer-term prospects will depend largely on domestic reform, including fixing local government, improving transport and energy productivity, keeping debt sustainable and securing permanently lower inflation.