MTBPS Review: South Africa in Need of a Bold Economic Reorientation

Zamikhaya Maseti

On Wednesday, 12 November 2025, Minister Enoch Godongwana delivered his Medium-Term Budget Policy Statement (MTBPS) Speech during a period of deep economic strain.

While the address contained one important policy shift, it ultimately reflected an overly cautious approach that cannot alter South Africa’s stagnation. The most notable development was the decision to lower the country’s inflation target to three percent with a one percent band. This is a significant structural adjustment. 

If managed well, without becoming a tool to restrain wages, it may gradually create space for lower interest rates, ease the cost of borrowing for households and businesses, and lift some pressure from families that have been struggling under high debt repayments. Lower interest rates could stimulate household spending and restore some confidence among consumers who have endured persistent inflation and stagnant incomes.

This shift, however, comes with a warning. Lower interest rates can easily drive a surge in new borrowing, especially in an economy where credit dependency is widespread and financial literacy remains uneven.

Unless regulators act decisively against predatory lenders and unless households exercise caution, the benefits of the lower inflation target may quickly be lost to a renewed cycle of indebtedness. Macroeconomic reform must not trap families in familiar patterns of financial vulnerability.

Beyond this positive development, the broader logic of the MTBPS remains steeped in fiscal consolidation. The Minister reaffirmed the stance that the government must reduce expenditure growth and reprioritise within fixed baselines.

This approach may offer comfort to markets, but it remains deeply misaligned with the realities facing communities across the country. Municipal infrastructure is collapsing, water and sanitation systems are failing, local economies are deteriorating, unemployment continues to rise, and crime increasingly undermines economic activity.

The speech acknowledges these pressures but does not confront them with the scale and urgency required. Stability takes precedence over growth, caution over reconstruction, and incremental adjustments over decisive intervention.

A deeper issue is the continued reliance on the National Development Plan as the central policy blueprint. The NDP projected economic growth of around five percent, investment rising to thirty percent of GDP, and the creation of eleven million jobs by 2030.

These targets have not been met and are unlikely to be met under the current policy paradigm. Growth remains stuck between one and two percent, investment remains low and concentrated, and unemployment has become entrenched. 

The NDP has not shifted the structural foundations of the South African economy because it does not sufficiently engage with the core barriers to transformation, including concentrated markets, uneven spatial development, failing municipalities, weak state capacity, and a private sector that invests cautiously in domestic productive activity.

The budget does not acknowledge this failure. Instead, it continues to operate within the NDP framework without offering a new path. This is a missed opportunity because the country needs a strategic reset for the period leading up to 2029.

The Minister should have signalled a bold departure from incrementalism and laid the foundations for a new economic direction grounded in productive investment and structural transformation.

This is where the lesson from Lenin’s New Economic Policy becomes analytically useful. In 1921, faced with the collapse of the Russian economy, Lenin introduced the New Economic Policy as a tactical shift that preserved state control over strategic sectors while allowing regulated private activity to revive production and stabilise society. 

It was neither an ideological retreat nor an abandonment of socialist principles. It was a pragmatic recalibration designed to rebuild productive forces and restore economic coherence. The relevance for South Africa is not in copying the model but in recognising the importance of adaptive leadership when conditions change. When a policy path is exhausted, leadership must show the courage to adopt a new one.

A modern New Economic Policy for South Africa would begin with a decisive identification of the constraints weakening growth.

These include the breakdown of energy generation and transmission, the deterioration of rail and port infrastructure, collapsing water and sanitation systems in municipalities, rising crime and extortion networks that suffocate investment, weak procurement systems, slow coordination in government, and a private sector that often avoids long-term developmental risks. These constraints require an economic plan that places productive investment at the centre of national strategy.

Such a plan would include binding investment compacts between the state, labour, and business, where firms commit to clear targets in fixed investment, localisation, and employment creation. It would require the revitalisation of the IDC, DBSA, and Land Bank as catalytic financiers capable of crowding in private capital. Incentives would reward firms that reinvest domestically and penalise the hoarding of idle cash.

Competition policy would be used more aggressively to break up cartels and open space for new entrants, particularly black industrialists, township enterprises, and small manufacturers. Infrastructure, particularly energy, logistics, and water systems, would be restored as the commanding heights of the economy under strong state coordination. Public employment would be expanded and linked to community infrastructure maintenance, food security, environmental rehabilitation, and local economic development.

This plan would also recognise that the problem in South Africa is not inflexible labour markets but inflexible capital. Workers are not the obstacle to growth. The challenge lies with firms that avoid long-term risk-taking, invest offshore, or prefer financial engineering to productive expansion.

A wage-led demand strategy remains central in a society where domestic markets are small and inequality is extreme. A New Economic Policy would therefore seek not to weaken labour but to reorient private sector behaviour towards national development priorities.

The MTBS did not offer such a vision. It stabilised the numbers without stabilising the country. It recognised the symptoms of crisis without offering the structural remedies required to address them. It presented fiscal discipline without developmental boldness. Although the shift to a lower inflation target is significant, it is not enough to change the national trajectory.

South Africa requires a new direction. It requires an economic plan rooted in lived realities, guided by scientific analysis, informed by international precedent, and driven by a national mission to rebuild the economy.

A New Economic Policy would provide such a direction, offering the country a realistic and transformative path to growth, employment, and structural renewal. The moment demands this clarity and courage. Stability without development will not suffice.

What the country needs now is a decisive break from the conservatism of the past decade and the adoption of a bold economic reorientation that places investment, industrialisation, and institutional renewal at the centre of the national agenda.

* Zamikhaya Maseti is a political economy analyst and holds a Magister Philosophae (M.Phil) in South African Politics and Political Economy from the erstwhile University of Port Elizabeth, now Nelson Mandela University.

** The views expressed do not necessarily reflect the views of IOL, Independent Media or The African.