South Africa’s Finance Minister, Enoch Godongwana, delivered the Medium-Term Budget Policy Statement on 12 November 2025, announcing a new inflation target for the country.
The budget policy might mark a turning point for South Africa’s economy.
Speaking before Parliament, he announced a new inflation target, a move that could lower interest rates, increase spending power, and renew confidence in South Africa’s financial future.
A NEW INFLATION TARGET FOR STABILITY
Godongwana announced that South Africa’s new inflation target will now be set at 3%, with a 1% tolerance band, replacing the old range of 3% to 6%.
The new target will be phased in over two years.
Furthermore, the 1% tolerance band will accommodate economic fluctuations.
He said this adjustment aligns South Africa with international best practices and aims to “strengthen price stability and boost investor confidence.”
Lower inflation expectations, he added, will create room for reduced interest rates, which will support household spending and business investment.
This follows persistent calls from the South African Reserve Bank (SARB) to lower the inflation target.
SARB claimed that the previous inflation band was too wide, making the country less competitive.
ECONOMIC GROWTH SHOWS SIGNS OF LIFE
Despite global challenges, including trade tensions and supply chain disruptions, Godongwana projected 1.2% economic growth for 2025.
This is more than double that of 2024.
Over the next three years, Godongwana said the country can expect an average of 1.8% in real GDP growth.
Energy, logistics and infrastructure reforms will influence the expected average.
“We are on track to restore fiscal sustainability,” Godongwana said, adding that government debt will stabilise at 77.9% of GDP.
He further says this is the first time since 2008 that public debt will not grow relative to the economy.
FIGHTING ILLICIT TRADE TO BOOST REVENUE
Moreover, Godogonwana also highlighted another major focus of the budget, that is, curbing illicit trade in cigarettes and alcohol.
Illicit trade has cost the country billions in lost tax revenue since 2020.
The South African Revenue Service (SARS) has suspended non-compliant tobacco producers.
The revenue service is also collaborating with law enforcement to dismantle criminal networks that erode fiscal stability.
Godongwana also emphasised that a lower inflation target and fiscal discipline are part of a broader vision to rebuild confidence and opportunity for all South Africans.
