The content on this page is not written by Polity.org.za, but is supplied by third parties. This content does not constitute news reporting by Polity.org.za.

This is the 32nd year since we began our hard-won transition from the apartheid regime in 1994 and the 30th year since the 1996 tangent, the reformist neo-liberal policy path that has not only failed to overcome high unemployment but has entrenched it as a long‑term structural crisis with higher rates and more people affected, and continued de-industrialisation, along with entrenched poverty and widened inequality.

The 2026 Medium-Term Budget Policy Statement (MTBPS), delivered by Minister of Finance Enoch Godongwana to Parliament on Wednesday, claims to lay the foundation for faster growth while maintaining austerity and the neo-liberal restructuring paradigm. For South Africa’s working class, neo-liberal restructuring and policy reforms, including austerity, deny millions their right to work, dignified employment and the opportunity to break out of poverty and inequality. With 13.1 million people unemployed and millions more living in poverty, the MTBPS fails to confront the crisis of unemployment and poverty.

The working class must reaffirm its rejection of austerity

While the National Treasury celebrates primary surpluses and debt stabilisation as achievements, unemployment continues at crisis-high levels and poverty continues to be entrenched.

Restraining annual expenditure growth to 3.6 per cent to narrow the deficit to -2.5 per cent of total national output or gross domestic product (GDP) by 2029/30 is austerity: fiscal consolidation at the expense of employment creation, the right to work for all, and social investment. Austerity shrinks the consolidated budget balance from -3.9 per cent to -2.5 per cent of GDP by cutting spending, rather than investing in mission-orientated, strategically guided spending to expand the economy and create employment at a scale sufficient to resolve the unemployment crisis.

Debt‑service costs rise to R509.3 billion by 2029/30 or 5.4 per cent of GDP, consuming more than health, education or social development. Over the past six years, South Africa’s debt profile has been shaped not only by the overall rise in borrowing but also by the National Treasury’s choice to take on foreign currency‑denominated loans. Although foreign loans remain a smaller share of total debt, at about 7 to 9 per cent of GDP, exchange rate volatility has made their impact on debt service costs disproportionately high.

Between 2018 and 2026, the rand weakened from around R13.50 to the dollar to over R16.50. This meant that every dollar of debt service required more in rand value terms. As a result, debt service costs rose from R229 billion in 2018/19 to R441.5 billion in 2026/27. It is projected to exceed R509 billion by 2029/30.

The National Treasury often frames debt service costs as a problem of excessive borrowing, yet part of the burden is self‑inflicted through the shift towards reliance on foreign, mainly US dollar-denominated, loans that expose the country to currency shocks. This volatility is absent in rand‑denominated bonds, which are more predictable and can be managed domestically.

The National Treasury justifies austerity measures that restrain or cut potential economic-expansion and employment-creating spending by rising debt service costs, but its own borrowing choices inflate those costs. When it diverts resources to cover currency‑driven spikes in debt service, it sacrifices employment creation, industrialisation and essential services. Needless to mention broader social transformation and development. Any honest discussion of debt service costs must therefore acknowledge the impact of foreign currency-denominated loans, which worsen austerity and undermine the right to work and broader social transformation and development.

As part of austerity, compensation for public sector workers and transfers to households are squeezed, undermining public employment and social protection. The impact of the foreign currency-denominated loans that the National Treasury has prioritised taking, rather than raising rand-denominated bonds, on debt service costs due to currency fluctuations must always be remembered when the same National Treasury calls debt service costs a problem. 

Our analysis of expenditure by function shows capped social wage spending, despite accounting for about 60 per cent of non‑interest expenditure. This leaves little room for new employment programmes, meaning the unemployment crisis will continue for many years, beyond the current ANC-DA-anchored coalition government.

In the division of revenue, local government receives only 10 per cent of non‑interest expenditure, with allocations tied to punitive compliance measures. This starves municipalities of resources for service delivery and employment creation.

Industrialisation and exports

The MTBPS projects 0 per cent average annual expenditure growth for industrialisation and exports between 2026/27 and 2029/30. This is a devastating admission. South Africa faces mass unemployment and continuing de‑industrialisation, yet the MTBPS offers no plan to revive manufacturing or expand exports. Instead, it accepts stagnation as policy.

Industrialisation is the backbone of employment creation. Without expanding manufacturing and building broader productive capacity, South Africa cannot create employment for the unemployed or guarantee the right to work for all. Export stagnation reflects structural weakness. Rather than investing in productive industries that could create employment for the unemployed and rebuild South Africa’s industrial base, the MTBPS maintains a paradigm of relying on austerity and neo-liberal reforms such as the unbundling of Eskom and Transnet, the liberalisation of electricity generation and transmission, and the opening of rail operations to private value capture and maximum profit competition.

The National Treasury frames these measures as structural reforms, yet in practice they insinuate private capital into core public infrastructure, enabling capitalist private value capture and profit competition for wealth accumulation in electricity generation, transmission and trade, rail freight operations and passenger services, as well as ports and water infrastructure.

The neo-liberal structural reforms entail a new form of privatisation. Even where the state retains ownership of the network infrastructure, the government fragments associated operations to strip them of their public character in favour of private value capture and wealth accumulation by the capitalist elements who stand to benefit. The SACP has consistently warned against this trajectory. We reiterate our position by calling on the working class to unite in defence of the Freedom Charter’s principle that “the people shall share in the country’s wealth” and that monopoly industries must belong to the people as a whole, collectively. We commit to continue widening and deepening working-class mobilisation to tilt the balance of forces in favour of national-revolutionary democratic transformation and development.

Network infrastructure alone is not an industry without the associated operations – electricity generation and transmission, rail freight and passenger services, and ports operations – which are integral to the functioning of the economy. By separating these functions and opening them to private capital capture, the MTBPS maintains the paradigm of austerity and neo-liberal restructuring, undermining and contradicting the Freedom Charter and its right to work for all, and weakening the state’s role and capacity to drive industrialisation and employment creation.

The promise of growth-enhancing infrastructure investment is undermined by reliance on extractive public-private partnerships in favour of the private interests that stand to benefit. This approach delivers profits to capitalist interests, not the total value captured by private interests as public revenue.

The far-reaching impact of austerity

Austerity budgeting affects many government functions.

Health and education are constrained by rising debt‑service costs, leaving hospitals and many schools understaffed and under‑resourced.

Housing and public transport allocations remain capped, undermining the ability to expand affordable housing and to build an affordable, safe, integrated and reliable public transport system for working‑class communities.

Social development is squeezed, limiting transfers to households and weakening social protection at a time of rising poverty and deepening cost-of-living crisis.

Although the allocation to support the fight against gender-based violence is enhanced, in general safety and security face cuts that reduce the capacity to address violence and crime. While the rich and well-off turn to private security, the working class is left exposed to high crime rates.

Municipal services are being undermined by austerity‑driven punitive measures that withhold funds from distressed municipalities in order to impose neo-liberal reforms such as the Distribution Agency “Agreement”. This arrangement usurps the constitutional competencies of local government and shifts control of essential services elsewhere.

Home Affairs, responsible for documentation, migration management and civic services, is also affected. Home Affairs faces one of the steepest cuts in average annual expenditure growth over the 2026/27 to 2029/30 period. Its budget declines at an average annual rate of -9.1%. Austerity limits its ability to modernise systems, expand access and ensure efficient service delivery. For the working-class, this means longer queues, weaker administration and barriers to exercising basic rights tied to identity documents and citizenship.

Also, privatisation of Home Affairs services through outsourcing to private interests and commercial banks is part of austerity and, equally, a serious cause for concern. It represents the creeping commodification of essential civic functions that should remain firmly under public ownership and democratic control.

The result is a hollowing out of the state’s capacity to deliver services and create employment.

Working class, unite!

The SACP calls on the working class to build maximum unity not only to reject austerity and neo-liberal structural reforms but also to build working-class power in pursuit of a better vision.

Adequate fiscal and monetary policy support for industrialisation, including employment creation as a right through massive public investment in programmes that guarantee access to work for all, including housing, healthcare, education and transport.

Reduction of interest rates for productive investment in general, co-operatives, micro and small enterprises, to drive industrialisation and access to productive work for all by prioritising maximum sustainable employment as a monetary policy objective, and to reduce the cost of living on families affected by the negative impact of interest rate hikes and the regime of high interest rates.

Public ownership and democratic control of energy, transport and water systems, ensuring employment and services are driven by social need, not profit.

Debt justice through redirecting resources to economic expansion, employment creation and social development.

A living wage and expanded social protection to confront the cost‑of‑living crisis crushing households.

Adequate funding for all functions of government, including Home Affairs, to ensure accessible, efficient services for the working class.

We reject austerity, we reject neo-liberal structural reforms, and we demand a budget that guarantees the right to work for all, rebuilds industrialisation and serves the people, not the markets.

--