SA posts third straight primary budget surplus

South Africa posted a third consecutive primary budget surplus, underscoring the government’s commitment to repairing state finances.

The continent’s largest economy recorded a better-than-expected surplus of 1.1% of gross domestic product in the year through March, surpassing the National Treasury’s February forecast of 0.9%, Director-General Duncan Pieterse said at a Citibank conference on Tuesday. A primary surplus excludes interest costs on public loans.

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Government debt has now stabilised and is forecast to decline this year and over the medium term, Pieterse said, marking a key milestone in South Africa’s fiscal consolidation efforts. In the February budget, Finance Minister Enoch Godongwana forecast debt would peak at 78.9% of GDP before easing to 68.3% by 2033-34.

“The primary surplus is forecast to grow,” he said.

In addition, tax and non-tax revenue was higher than expected when the budget was announced, while spending was lower, including on debt-service costs. This showed the government’s ability to increase revenue and contain expenditure as needed to reach its targets, Pieterse said.

The main budget deficit ended the 2025-26 fiscal year at 4.3% of GDP, compared with a previous estimate of 4.6%, and is projected to fall to 3.1% by 2029, he said.

The stronger fiscal performance reflects Godongwana’s determination to rein in public finances. Since taking office in August 2021, he’s largely resisted bailouts for debt-laden state companies unless they agreed to implement structural reforms, while maintaining tight control over government spending.

The fiscal discipline may pave the way for credit-rating upgrades from Fitch Ratings, Moody’s Ratings and S&P Global Ratings over the next year, Bank of America Corp analysts Tatonga Rusike and Raghav Adlakha said in a note to clients on Monday.

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Moody’s recently revised South Africa’s outlook to positive, while affirming its Ba2 rating, two notches below investment grade. S&P maintained its BB rating, also two levels below investment grade, and retained a positive outlook after upgrading the country in November.

Treasury’s twin objectives of stabilising and reducing the debt-to-GDP ratio while increasing the primary surplus — the de facto fiscal anchors in recent years — will be reinforced by the introduction of a formal rule, Pieterse said.

“This will provide a permanent, binding mechanism to lock in the fiscal gains achieved in recent years, strengthening policy credibility and further lowering our risk premium,” he said.

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