MTBPS 2026: Rising revenue allows for fuel levy relief, El Niño readiness in Godongwana’s mini budget

This Medium-Term Budget Policy Statement is a big deal: debt stabilisation has been the elusive Holy Grail long pursued by Treasury, and is the metric that the markets and credit ratings watch like a hawk.

It’s not quite mission accomplished, but South Africa is safely back from the edge of a fiscal cliff and the dividends include fuel levy relief for hard-pressed consumers and a R10-billion kitty to deal with any droughts and disasters that El Niño may bring.

Finance Minister Enoch Godongwana announced the cut in the fuel levy in his annual Medium-Term Budget Policy Statement (MTBPS) to Parliament – and the 2026 edition is the most promising and plausible in years, and should translate into further ratings upgrades.

“Because we have rebuilt fiscal buffers, government is in a stronger position to respond, including by providing temporary fuel levy relief again,” Godongwana said in his speech on Wednesday, 21 October.

“We are aware of the pressure that rising fuel prices are placing on households and businesses. To provide temporary relief, the fuel levy will be reduced by R3 per litre for diesel and R1.50 per litre for petrol from 4 November 2026 up until 1 December 2026.”

This move has been enabled by a favourable combination of rising revenues and falling debt – the precise trajectory that South Africa needs to maintain to dig itself out of the deep fiscal pothole that was dug during the lost Zuma years.

Speaking of digging, the mining sector played a starring role in delivering a fiscal boost from higher precious metals prices. The projection for gross tax revenue for this year has been revised upwards by R17.1-billion compared with the February estimate.

“For the first time in nearly two decades, our debt-to-GDP stabilised, at 78.4% of GDP in 2025/26,” Godongwana said.

From this peak it is projected to descend to 76.6% by 2030 and to 66.6% by 2035.

“The budget deficit is also better than we expected in February. It will now narrow to 4.3% of GDP this year compared to the 4.5% forecast at the time of the Budget. By 2030, we see the deficit falling to 2.5% of GDP.”

This is a big deal: debt stabilisation has been the elusive Holy Grail long pursued by the Treasury, and is the metric that the markets and credit ratings watch like a hawk.

It all adds up to additional funds being made available to save some cash for a rainy day – or in this case, the expected scorching droughts from the unfolding El Niño that is widely regarded as the strongest on record.

“In an environment of elevated uncertainty, government is increasing the contingency reserve to R10-billion in 2026/27 for drought and El Niño response, and potential responses to additional energy price spikes,” the MTBPS statement said.

Thoughtful Treasury Director-General Duncan Pieterse told Daily Maverick in a brief interview that fiscal space had opened up to allow for such measures to respond to challenges such as elevated fuel prices or drought.