By Bertie Nel,
The Medium-Term Budget Policy Statement’s outlook for growth, tax and government spending shapes the environment SMME owners work in.
South Africa’s Finance Minister, Enoch Godongwana tabled the Medium-Term Budget Policy Statement (MTBPS) on Wednesday, 21 October. The MTBPS is a halfway mark, showing how government’s finances have held up since February and giving an early indication of the decisions likely to follow in the February 2027 Budget.
South Africa’s economic growth outlook has weakened, with growth now expected to reach just 1.2% in 2026, down from the 1.6% forecast in February. But for the first time in nearly two decades, government debt has stabilised, at 78.4% of GDP in 2025/26. This could give government more room to spend on the country’s needs.
For many small-business owners, these numbers can seem far removed from the real pressures of paying staff, settling suppliers and keeping the lights on. But government’s finances influence tax, inflation, interest rates and the amount spent on the infrastructure and services that businesses rely on. Together, these shape your costs, your customers’ or clients’ spending power, and your ability to borrow and grow.
What the outlook means for your business
- Major tax changes are usually announced in the February Budget, but the MTBPS signaled a focus on fiscal discipline. Government has released draft fiscal anchor legislation for public comment, designed to limit borrowing and better protect the state’s financial future. Early signals help you plan rather than react.
- Inflation was 4.4% in August, while record-high fuel prices have put pressure on both businesses and consumers. To ease the strain, the fuel levy will be cut from 4 November to 1 December 2026, reducing the cost by R3 a litre for diesel and R1.50 for petrol. Smaller cuts will remain in place until 5 January 2027. This offers some short-term relief, particularly for businesses that rely on transport, but the pressure of higher costs remains.
- The repo rate has risen twice this year, to 7.25%, making credit more expensive for businesses that rely on overdrafts or loans. The Minister noted that a lower inflation target and financial discipline are helping to contain borrowing costs.
- With growth slowing, customers are likely to remain cautious. However, the Minister identified failing infrastructure as a priority, particularly fixing the institutions responsible for delivering water services. This can be beneficial for businesses. Infrastructure spending also has the potential to open doors for suppliers.
Although you can’t control any of these factors, you can take steps to make sure your business is prepared to withstand them.
Five steps to take now
- Plan your cash flow. Look three to six months ahead, follow up promptly on unpaid invoices and, where possible, negotiate payment terms that match when cash comes in.
- Build flexibility into your budget. Allow for rising costs and realistic changes in sales. Review performance monthly so you can spot shortfalls and adjust in time.
- Build a cash reserve. Aim to set aside enough to cover a few months of fixed costs, such as rent and salaries, in a separate account. A reserve can help you weather a slow month without having to borrow.
- Use debt strategically. Borrowing is best used to fund investments that can generate income, such as equipment or stock you know you can sell. Avoid using debt to cover ongoing losses, and review what your existing borrowing is costing you.
- Plan for different scenarios. Consider what your business would look like if trading improves, remains stable or deteriorates. Decide in advance where you would cut costs, and what would give you the confidence to invest.
Don’t put your ambitions on hold
When the economy is uncertain, it’s tempting to put every growth plan on hold until conditions improve. But waiting for the perfect moment can mean missing real opportunities.
For many owners, their business is their largest asset and their main source of income. A financial adviser can help you plan to ensure your business supports your long-term goals rather than putting them at risk.
The Budget sets the backdrop for what lies ahead. But the decisions that shape your business are still yours to make, and the best time to start making them is now.
Bertie Nel, Head of Financial Planning and Advice at Momentum
