The Alternative Information and Development Centre (AIDC) condemns the 2025 medium-term budget policy statement announced by the Minister of Finance, which continues to prioritise profits over meeting people’s needs. Non-interest expenditure as a percentage of GDP is decreasing over the medium term, representing a shrinking role of the state. The decision to narrow South Africa’s inflation target to 3%, coupled with continued austerity and the liberalisation and privatisation of key sectors of the economy, represents an entrenchment of neoliberal dogma that will worsen the country’s social crisis and perpetuate economic stagnation. The obsessive fixation on the primary budget surplus indicates a mismatch in priorities – thousands of children die of hunger and malnutrition each year, while the primary budget surplus is projected to increase from R68.5 billion to R224 billion in 2027/28.
We are especially outraged by the Minister of Finance’s decision to narrow the inflation target to 3 percent. This is part of the government’s plan to do everything to attract foreign investment and remove all remaining restrictions on capital flight.
Inflation in South Africa is not driven by excess demand but by cost-push factors. These are external shocks such as oil price increases and the rising cost of basic services imposed by municipalities desperate for revenue. Yet the South African Reserve Bank (SARB) continues to rely on blunt monetary tightening, keeping interest rates among the highest in the world, purportedly to suppress inflation. The Treasury’s faith that lower inflation “expectations” will somehow deliver lower inflation ignores the material causes of price increases. They are unable to answer how the lowering of the inflation target will mean lower interest rates. That is because it is clear, even to them, that South Africa’s high interest rates will remain. The result will be persistently high borrowing costs, further contraction in household spending, and intensified hardship for the working class. Already, households spend nearly 9% of their income servicing debt, and total household debt stands at over 60% of disposable income. High interest rates not only squeeze consumers but also deter investment in labour-intensive sectors, reinforcing a speculative and financialised growth path that destroys jobs rather than creates them. While the banks and investors celebrate the new inflation target, the indebted majority will plunge deeper into poverty.
Structural Reforms for Profit, Not for People
The Medium-Term Budget Policy Statement (MTBPS) doubles down on so-called “structural reforms” under Operation Vulindlela, designed to mobilise private finance through the Credit Guarantee Vehicle (CGV), blended finance, and public-private partnerships (PPPs). These schemes amount to socialising risk and privatising profit—the state absorbs losses while the private sector reaps guaranteed returns.
This agenda, including the unbundling of state-owned enterprises and the push for “cost-reflective tariffs” and prepaid meters, deepens the commodification of essential services. Such reforms will raise costs for poor households and exclude millions from access to electricity, water, and transport. Far from spurring productive investment, Operation Vulindlela has coincided with declining fixed investment and continued deindustrialisation. The state’s investment plan is not aimed at meeting people’s needs. Instead, it entrenches an export-oriented, profit-driven model that sacrifices social welfare and economic sovereignty. Such policies are completely out of sync with the new global trade regime.
Real Alternatives Exist: Redistribute Wealth, Mobilise Public Investment
The Treasury’s ideological blinkers prevent it from seeing real alternatives. South Africa is not short of resources—it is short of political will.
Tax the wealthy: The top 1% hold 55% of national wealth. A modest wealth tax could raise R192 billion annually, more than double the policing budget.
End tax evasion: SARS estimates R600 billion is lost to tax evasion each year. This is enough to double both the education and health budgets.
Tax idle capital: Roughly R1.8 trillion in capital lies idle in South Africa. A tax on unproductive capital would both discourage hoarding and generate funds for job creation and skills development.
Mobilise domestic finance: The Government Employees Pension Fund (GEPF)—with assets of R2.38 trillion—could play a transformative role. Redirecting its mandate toward government bonds would secure returns for pensioners while providing the state with affordable capital to fund public sector jobs, infrastructure, and green industrialisation. There is no reason to borrow from the IMF or World Bank when alternative financing options exist.
South Africa’s economic crisis is not inevitable. It is the result of political choices. The MTBPS once again chooses markets over people, private profits over public welfare. What is required is a decisive break from austerity and a bold programme of redistributive public investment aimed at full employment, reindustrialisation, and ecological transition.
This demands mass pressure from trade unions, social movements, and communities. Only through such collective action can we shift from austerity and privatisation to an economy that serves the people, not profits.
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For more information, contact:
Aliya Chikte: 082 695 5659
Dominic Brown: 081 309 4973
Chloé van Biljon: 082 892 4702
Dick Forslund: 082 895 7947
