OPINION |Godongwana’s mini-budget reflects a nation caught between promise and peril

SA’s medium-term budget policy statement (MTBPS), presented by finance minister Enoch Godongwana on Wednesday marks a crucial point in the country’s economic path.

More than a fiscal plan, it reflects a nation caught between promise and peril, aiming to stabilise debt, boost growth, and restore confidence among entrepreneurs, investors, and workers.

For micro, small and medium enterprises (MSMEs) and rural economies, the message is both hopeful and sobering. According to the latest “Quarterly Labour Force Survey” by StatsSA this week, the official unemployment rate dropped slightly to 31.9% from 32.9% in the previous quarter.

About 7.4-million people actively seeking work are unemployed, while the expanded definition of unemployment, including discouraged work-seekers, raises the rate to 42.6%, or around 10.9-million adults.

The 2025 medium-term budget policy statement urges private sector-led job creation, with MSMEs as key drivers of inclusive growth, striking a balance between caution and challenge.
— Phosane Mngqibisa

Youth unemployment is high at 45.5%, affecting more than 4.9-million young people. Among women, the unemployment rate is 34.8%, rising to nearly 45% in the expanded category, or about 5.8-million women. These figures highlight SA’s unemployment crisis, emphasising MSMEs in townships and rural areas as vital for recovery.

The 2025 MTBPS urges private sector-led job creation, with MSMEs as key drivers of inclusive growth, striking a balance between caution and challenge. The minister’s optimistic fiscal narrative highlighted economic progress. Godongwana said government debt will stabilise at 77.9% of GDP, meaning about 78c of every R1 goes to debt.

This limits funds for job creation, infrastructure, and services. The ratio shows debt relative to the economy, not repayment per rand earned.

A high ratio means less money for services, as more funds go to interest. SA’s issues worsen as the economy stagnates and doesn’t create sustainable jobs.

Notably, since the 2008 global financial crisis, debt won’t increase as a share of GDP. The primary budget surplus is expected to reach R68.5bn this year, rising to R224bn by 2028/29, while the deficit narrows from 4.5% to 2.7%.

These figures show fiscal consolidation but have implications. Tighter spending means fewer bailouts and less space for public-sector jobs, placing more responsibility on MSMEs and private investors to boost employment and productivity.

The budget projects a 1.2% growth in 2025, up from 0.6% in 2024, with an average of 1.8% from 2026 to 2028. While modest, this boosts confidence but remains below the 5% needed to reduce unemployment. MSMEs face dual challenges: maintaining operations with low demand and preparing for the government’s infrastructure recovery.

A highlight was the shift to investment-driven spending. Godongwana reaffirmed that infrastructure is the economy’s ‘flywheel’. Capital payments are expected to grow by 7.5% over the medium term, aided by a R15bn infrastructure bond to attract private capital.

This creates opportunities for MSMEs in construction, maintenance, logistics, and supply-chain services to participate in projects. Also, new PPP regulation changes allow smaller projects to be fast-tracked, helping township enterprises engage more in government procurement.

The township economy, valued at over R900bn and home to more than 60% of MSMEs, is a vital yet underutilised sector in SA.

It faces challenges such as limited finances, poor infrastructure, and unreliable services.

Godongwana’s pledge to allocate R19.3bn for reforming metro trading and municipal capabilities, along with changes to the municipal infrastructure grant, could boost township and rural businesses.

If effectively executed, these measures might unlock local economic potential, create jobs, and strengthen communities. This optimism must be balanced with realism, as capacity constraints, corruption, and project mismanagement threaten many municipalities.

The risk of large contractors capturing most infrastructure projects remains high. For MSMEs in townships to benefit, the government must address business forums demanding extortion and hijacking projects. Enforcement of local procurement targets, simplifying compliance, and transparent tender access are essential.

Without these, the R15bn bond and PPP reforms will remain inaccessible for small businesses. The minister’s introduction of the TARS initiative aims to save R6.7bn by cutting wasteful spending, showing fiscal prudence.

However, reducing expenditure might harm local economies reliant on government contracts, especially township MSMEs dependent on tenders and infrastructure projects.

Savings should target inefficiency, not essential services or development programmes supporting local businesses. The inflation target was revised to 3%, with a 1% flexibility band, aiming to lower borrowing costs, stabilise prices, and boost long-term investment. Short-term relief for MSMEs, burdened by high costs and tight credit, may be limited.

They need affordable finance, simpler regulations, and mentorship. The R2bn capitalisation of the Credit Guarantee Vehicle, focused on infrastructure and energy, could extend to MSME finance, especially in townships and rural areas. Godongwana’s firm stance on fighting illicit trade, especially in cigarettes, alcohol, and fuel, is welcomed.

Sars estimates the illegal cigarette trade has cost SA more than R40bn since 2020. The crackdown benefits legitimate township traders competing with untaxed products and shows a commitment to fairness and the rule of law.

The budget has gaps, especially in integrating informal-sector operators into the formal economy. Millions of township entrepreneurs operate outside formal frameworks due to necessity, lacking access to credit, training, and market links.

Without inclusion measures like simple registration and affordable energy, they may miss out on fiscal reform benefits. At the national level, the unemployment rate stays around 31.9%, or 7.4-million people.

Expanded unemployment is 42.6%, or 10.9-million people, showing that economic stability doesn’t guarantee shared prosperity. Youth unemployment is 45.5%, with 4.9-million young people without jobs, indicating a generation on the margins of productivity.

For women, 5.8-million are unemployed or inactive, highlighting gender disparities needing inclusive policies.

SA’s employment data shows a mixed picture. The official unemployment slightly dropped to 31.9% in Q3 2025, indicating modest recovery amid challenges like slow growth, high costs, and low investor confidence.

However, the expanded rate, including discouraged job seekers and underemployed people, rises to 44.9%, meaning nearly half the working-age population is unemployed or underemployed. The official rate only counts those actively seeking work, while the expanded rate includes those who have given up searching and part-time or low-quality workers.

SA’s working-age population is about 40.9-million, with 24.3-million in the labour force. About 16.5-million are employed, while 7.8-million are unemployed.

When considering discouraged workers and the underemployed, the total number of individuals seeking work exceeds 11-million. MSMEs face challenges such as slow demand, high unemployment, and modest GDP growth but can find opportunities in infrastructure and logistics reforms.

By engaging in renewable energy, construction, transportation, and local procurement, they support recovery. Despite government spending cuts and efficiency efforts, the vitality of the private sector, especially that of MSMEs, is essential for transforming fiscal stability into inclusive growth.

Godongwana’s budget strikes a balance between restraint and reform, being fiscally sound, cautious, and necessary.

Its success relies on implementation. For MSMEs, entrepreneurs, and rural innovators, it offers potential, not ease. Turning this into progress requires honest, transparent, and accountable partnerships among government, business, and communities. Only then can SA shift from stabilisation to transformation, austerity to opportunity, and hope to prosperity.