By Deputy Finance Minister Ashor Sarupen

OPENING REMARKS

Good day, ladies and gentlemen. My apologies for being unable to attend this engagement in person, but I trust that you are having good and productive engagements today. Today’s address highlights how infrastructure, budget allocations, public debt management, and the G20’s inclusive economy priorities under South Africa’s presidency can come together to foster inclusive growth in South Africa.

CURRENT ECONOMIC CHALLENGES

Unfortunately, our country continues to be one of the most unequal in the world. Over the past decade, our deteriorating infrastructure, especially at the municipal level, electricity disruptions, crime, corruption, weak investments, and very poor education outcomes have created a toxic mix that has reduced our economy’s growth potential.

INFRASTRUCTURE AS A GROWTH DRIVER

In this context, infrastructure is a key driver of economic growth and job creation. As part of the government’s medium-term economic strategy under the GNU, we have allocated over a trillion rand to infrastructure over the next three years, focusing on sectors such as energy, transport, water, and sanitation. This investment aims to address the constraints that undermine productivity and job creation and should hopefully lead to a positive impact on employment and poverty. A scenario analysis presented in the 2025 budget overview shows that rapid investment in infrastructure could increase South Africa’s real GDP growth to 2.7% in 2025 compared to the baseline growth rate of 1.4%.

REFORMS TO SUPPORT INFRASTRUCTURE DELIVERY

Several reforms are underway to assist the government in delivering infrastructure and to encourage private sector investment. The first of these is the budget facility for infrastructure, which is being strengthened to develop a pipeline of projects that can attract funding. It will run multiple appraisal windows while managing fiscal exposure and risks. We have new public-private partnership regulations which took effect on the 1st of June this year, and these have simplified processes and introduced supporting frameworks for unsolicited proposals. A single structure overseen by the National Treasury will be established later this year to coordinate state participation in project preparation and planning, public-private partnerships, funding, and credit guarantees.

SOCIAL SPENDING AND REDISTRIBUTIVE MEASURES

Our government spending is highly redistributive, with 61% of the budget allocated to what we term the social wage, which includes spending on health, education, social protection, community development and employment programs. This allocation reflects our commitment to supporting low-income and vulnerable households while maintaining fiscal discipline. We know from data across the world that investing in health and education is vital for promoting not only equality but also long-term growth and maximising human potential. Our provincial education sector baseline over the medium term is 1 trillion rand, while the provincial health sector budget is 845 billion rand over the medium term. Additional resources have been provisionally allocated to expanding early childhood development and ensuring that we are able to right-size education and health in terms of worker numbers. Social grants continue to provide essential support to vulnerable groups.

EMPLOYMENT AND LABOUR MARKET PROGRAMS

There are several employment and active labour market programs that help transition people into work, support the temporarily unemployed, and encourage entrepreneurship. The social protection employment support programs are currently being reviewed to maximise their efficacy.

IMPROVING PUBLIC SPENDING EFFICIENCY

To achieve our national priorities, we need to realise greater efficiencies in public spending. To improve public spending, we are applying emerging insights from spending reviews that have been undertaken and will continue conducting further reviews to ensure that we can improve outcomes for the taxpayer money that we spend.

STRUCTURAL REFORMS: OPERATION VULINDLELA

Much has been said of Operation Vulindlela, which entered its second phase in May 2025. We are building on the existing reforms while expanding into new areas that are critical for inclusive and sustained growth. These new reform areas include strengthening local government and improving basic service delivery, driving digital transformation to support service delivery, and creating dynamic and integrated cities to enable economic activity. This includes spatial reforms to reduce transport costs and connect people to opportunities.

FISCAL MANAGEMENT AND DEBT STABILISATION

For the first time since the 2000s, the government is consistently running a primary budget surplus, where revenue exceeds non-interest expenditure. Our strategy is underpinned by growing this primary surplus to stabilise the debt-to-GDP ratio. We intend to do that this year, which will mark an important turning point in our public finances. Interest payments remain a significant burden on the fiscus, consuming 22% of revenue in the current budget. Reversing this upward trend of interest payments will allow the government to spend less on debt service costs and more on infrastructure, economic growth, and essential services such as health and education, which are absolutely critical to growth and development in our country.

LONG-TERM FISCAL ANCHORS

As public finances stabilise and our fiscal targets are achieved, the government has been exploring the implementation of strong fiscal policy anchors. These measures will help prevent a recurrence of the cycle of high spending, high deficits, and high debt.

SOUTH AFRICA’S G20 PRESIDENCY AND GLOBAL PRIORITIES

When it comes to the G20, the theme of South Africa’s presidency is solidarity, equality, and sustainability. G20 countries play a pivotal role in addressing global challenges such as poverty, inequality, and job creation. South Africa’s G20 presidency has created a task force to deliver a set of policies and principles for inclusive economic growth, employment creation, and the fight against inequality.

CONCLUSION

The current budget and the direction we are taking highlight the government’s commitment to achieving our key milestones: stabilising government debt as a percentage of GDP in this fiscal year, maintaining a sustained primary budget surplus, and continuing investment in infrastructure and the social wage. We are laying the foundation for long-term growth through increased infrastructure investment and the implementation of structural reforms. We are also allocating resources to support the most vulnerable in society. Prudent fiscal and debt management will create the fiscal space needed to spend more on critical national priorities. Our G20 leadership promotes an environment conducive to inclusive growth. These are important steps toward achieving inclusive and sustainable growth in South Africa.

I thank you.