R131 Billion Primary Surplus. Treasury Moves to Legislate Fiscal Principles

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Your client asks why borrowing is still expensive when government says its fiscal position is back on track. The honest answer has a date on it. That date is 21 October.

What happened

National Treasury Director-General Dr Duncan Pieterse delivered a speech at the RMB Morgan Stanley Big Five Investor Conference in Cape Town on 14 September 2026. Since Treasury was entering its traditional closed period the following week, he said this was probably its last engagement with investors before the Medium-Term Budget Policy Statement (MTBPS), which Finance Minister Enoch Godongwana will present on Wednesday 21 October.

He covered four things:

1. the fiscal strategy,

2. legislation to anchor sound fiscal principles,

3. municipalities, and

4. the restructuring of the electricity industry.

A fiscal anchor, written into law

The 2024 Macroeconomic Policy Review recommended that government consider adopting a principle-based fiscal anchor, with the aim to commit government to achieving fiscal sustainability in a transparent and accountable way. A ‘fiscal anchor’ is a framework intended to constrain government spending and borrowing and support sustainable public finances. Pieterse confirmed that the work has progressed. In his words, “Legislation has been drafted, the technical work is complete”, with an update due on 21 October.

How the rule is built matters. Treasury does not want a fixed number, like a deficit capped at a set percentage of GDP. It prefers an anchor based on keeping public finances sustainable. An update on the legislation is expected on 21 October.

The numbers that backs he confidence

South Africa has run primary surpluses for three years in a row, meaning revenue exceeds non-interest spending. Pieterse said this is the first time this has happened since the global financial crisis, after which government ran primary deficits for 13 consecutive years. Pieterse said that, in a weak economy, debt tripled and debt-service costs soared, crowding out social spending, eroding fiscal credibility and contributing to South Africa losing its investment-grade credit status.

This year's primary surplus is projected at around R131 billion, which is R100 billion larger than three years ago. Treasury remains confident that the debt-to-GDP ratio stabilised in 2025/26 and will decline over the medium term.

Revenue is also running ahead of Budget estimates, even after the fuel levy relief. Pieterse attributed this to strong growth in corporate income tax collections.

Why this shows up in your client's numbers

When businesses and investors have confidence in a country's fiscal path, they demand a lower risk premium to hold its assets. When that risk premium falls, the cost of borrowing and therefore the cost of capital can decline across the economy. This matters for businesses wanting to expand and employ more people. It matters for households taking on longer-term credit. And it matters for small and medium-sized businesses that need finance to invest and grow.

So, when Treasury talks about fiscal sustainability, it is not simply talking about balancing government's books. Its argument is that a credible fiscal path can create conditions for greater investment, economic growth and job creation.

It is not an immediate interest-rate cut, so do not build an assumed benefit into a client's cash-flow forecast for next quarter. But the cost-of-capital channel is an important part of Treasury's argument for fiscal discipline.

If you touch municipalities, read this part twice

Municipal finances have deteriorated steadily, along with the ability of many municipalities to provide basic services such as water and electricity. Treasury is responding with an integrated package of local-government reforms.

In June, the Minister of Finance suspended equitable share transfers to 69 municipalities as a corrective measure to address the mismanagement of public funds. The law allows the transfers to be suspended for 30 days without parliamentary approval. The Minister announced at the end of July that the transfers would be released.

Many of the affected municipalities subsequently signed payment agreements with creditors and put procedures in place to manage irregular expenditure and prevent it recurring. However, Pieterse stressed that serious financial and governance weaknesses still need to be addressed and that the Minister may take action again in future.

Treasury is also addressing money owed to municipalities by government itself. Pieterse said National Treasury was writing to national departments with outstanding balances to verify the amounts and make arrangements to settle them. Where non-payment persists, Treasury will engage the relevant accounting officers to ensure the debt is settled.

Three further areas are worth watching:

1. MFMA amendments later in 2026, aimed at identifying financial stress earlier, supporting firmer action where failure persists and assigning clearer responsibility for corrective measures.

2. Public-private partnership regulations for local government, which Treasury says it will soon publish to unlock private-sector investment in infrastructure needed to deliver basic services.

3. Longer-term structural reform, including a new White Paper on local government being developed by the Department of Cooperative Governance and Traditional Affairs, together with a Treasury review of the local government fiscal framework.

For accountants preparing, reviewing or auditing work in the municipal space, the proposed MFMA amendments will be important to watch. They are specifically intended to identify financial stress earlier, support firmer intervention and clarify responsibility for corrective measures.

For clients supplying municipalities, Treasury's initiative to verify and settle outstanding government balances is also something to consider when reviewing outstanding municipal receivables and related recoverability assessments.

The electricity number worth noting

South Africa's current average continuous electricity demand is around 26 gigawatts. There are now about 32 gigawatts of mostly private-sector renewable energy projects in the grid connection process. The major constraint is the transmission network. Treasury estimates that more than R440 billion will be required to expand and modernise transmission infrastructure over the next decade, with a significant portion expected to come from the private sector.

The restructuring of Eskom is intended to establish an independent transmission company. Pieterse said the next step is to secure the independence of the National Transmission Company of South Africa (NTCSA) by transferring ownership and control of the transmission assets to an independent Transmission System Operator (TSO).

The TSO is intended to have its own balance sheet and transparent cash flows, putting it in a stronger position to raise funding and partner with the private sector to develop the transmission network.

The Electricity Restructuring Task Team has completed its Phase 1 report, which was endorsed by the President. Phase 2 is under way and includes a detailed implementation plan, legal due diligence and a lender engagement strategy.

Treasury aims to implement the unbundling over the next 18 months, while putting governance and regulatory measures in place to strengthen NTCSA's independence from Eskom. State ownership of the transmission entity will be preserved.

Pieterse also stressed that the transaction will be structured so that Eskom is not worse off, the transmission entity remains financially sustainable and the broader fiscal strategy remains on track.

Government has spent R464 billion of taxpayers' money over roughly the past decade supporting Eskom. Pieterse said government therefore has no interest in compromising Eskom's future viability and will ensure the unbundling is carefully sequenced and managed to address the risks.

For context on how the wider reform programme is tracking, see Operation Vulindlela Q3 Update: What's Working, What's Delayed.

What to do this week

1. Diarise 21 October.
   Tell clients now that you will send them a summary of the MTBPS. That one email positions you as the person who explains policy, not simply the person who files forms.

2. Review corporate provisional tax estimates.
   The latest revenue numbers show strong growth in corporate income tax collections. Consider whether this broader revenue trend has implications for the estimates you are preparing for corporate clients.

3. For municipal suppliers, revisit outstanding receivables.
   Treasury's initiative to verify government balances and arrange settlement provides a reason to revisit significant municipal debtors and the assumptions underlying recoverability assessments.

4. For clients in construction, engineering and energy services, watch the transmission pipeline.
   The approximately 32 GW renewable project queue and the estimated R440 billion transmission infrastructure requirement point to a significant infrastructure programme over the coming years.

5. Watch for the fiscal anchor legislation and MFMA amendments.
   The fiscal legislation has already been drafted, with an update expected on 21 October, while MFMA amendments are expected later in the year. Both could have implications for practitioners advising public-sector and municipal clients.

The message from Treasury is therefore bigger than a R131 billion number. The focus is on whether government can establish a credible and sustainable fiscal path, embed that approach in legislation, address weaknesses in municipalities and unlock investment in electricity infrastructure.

For accountants, the opportunity is to understand what those policy changes mean before the client asks.

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