The National Education, Health and Allied Workers’ Union (NEHAWU) takes note of the presentation of the 2026 Medium-Term Budget Policy Statement (MTBPS) in Cape Town by the Minister of Finance, Enoch Godongwana.
For the past three years, the MTBPS has been structured around fiscal consolidation and debt stabilisation. National Treasury has consistently argued that containing public expenditure, generating primary budget surpluses and stabilising the debt-to-GDP ratio will restore investor confidence, reduce borrowing costs and create the conditions necessary for higher economic growth rate.
However, South Africa continues to experience persistent economic stagnation, high unemployment, poverty and inequality. This raises an important question about whether the government’s fiscal strategy is sufficiently responsive to the country’s developmental challenges or whether the continued expenditure restraint risks undermining the foundations required for inclusive and sustainable economic growth.
Previously, in the 2025 MTBPS the Treasury maintained a fiscal strategy centred on expenditure restraint and debt stabilisation. National Treasury revised the main budget revenue estimates downwards by R25.7 billion over the following two years and reduced projected non-interest expenditure by a net R20.4 billion, including reductions to the expenditure ceiling of R6 billion in 2026/27 and R13.8 billion in 2027/28. These decisions created a constrained fiscal environment for government departments, particularly those responsible for providing essential public services. The 2026 MTBPS takes place in the context of a contracting economy in quarter two of 2026, with a decline in Gross Domestic Product (GDP) by 02%.
This decline in economic growth translated into 345 thousand people losing their jobs in the same quarter. The South African economy requires a minimum of 3% growth per annum to begin addressing the persistent crisis levels on unemployment, whereby nearly half of our population (43.8%) are not employed and are living in poverty. The 2026 MTBPS projects economic growth of only 1.2% in 2026, compared with 1.1% in 2025. This is also a downward revision from the 1.6% growth forecast in the February 2026 Budget. Growth is expected to improve gradually to 1.6% in 2027, 1.8% in 2028 and 2% in 2029. By the Minister’s own admission, the 3% growth is only projected to occur in 2034, which is a damning testimony to the incompetence of the National Treasury.
Whilst NEHAWU welcomes the intervention that was required in terms of the Fuel Levy, we warn that this is only a temporary reprieve for workers. Next year remains unpredictable amidst the desperation of the collapsing American imperialism which is currently caught up in a quicksand of the unfolding attritional war with the Islamic Republic of Iran.
We therefore urge National Treasury to consider a long-term strategic approach to ensure that workers and poor communities are not bearing the main burden as a result of the volatile uncertainty in global markets.
We also note the additional R71.1 billion allocations to main budget expenditure over the medium term to support health, education, local government, industrial development, infrastructure and state capacity. These allocations however, must be assessed against the existing funding shortfalls and rising service-delivery backlogs. The critical issue is whether these additional resources would be sufficient to reverse the cumulative effects of underinvestment and the weakened state capacity caused by the rolling austerity measures over the past decade.
MACROECONOMIC POLICY
As always, this year’s MTBPS also reads like a typical Neoliberal handbook, replete with the same discredited rhetoric that has been peddled by National Treasury for years. It is clear from the MTBPS that the size, capacity and role of the state is shrinking, with non-interest expenditure as a percentage of GDP going from 23.8% in the 2023/24 period to a projected 23,3% in 2029/2030. This represents a picture of the state being intentionally hollowed out.
The Minister claims that no major budget cuts will be made, but encourages early retirement schemes without funding the filling of the existing and crucial public service vacancies. Overall, the Minister has used disingenuous Neoliberal tools to reprioritize spending without actually expanding funding. Some of the programmes that are going to be closed to save funds are socially essential and would have performed more effectively and better had it not been for the effects of the long-running programme of austerity measures that destroyed the capacity and capability of the state. Ironically, debt as a percentage of GDP is now falling, yet the promised investment, growth and job creation remain elusive.
NEHAWU rejects any notion of introducing fiscal anchors into policy and law. Fiscal anchors constitute a mechanism used by Treasuries to strictly contain spending and debt. The proposed legislation that is set to be tabled in Parliament in late 2027 to this effect is both unnecessary and illogical. Hence, we outrightly rejects these so-called fiscal guardrails as they would impose a fiscal policy straightjacket preventing innovative thinking in pulling the economy out of the current state of stagnation. Such austere Neoliberal fiscal policy rules have dismally failed in the face of the currently deepening socioeconomic crises in various countries of the European Union (EU).
Several countries within the EU have now abandoned their compliance with these rules. The Minister indicates that public debt stabilised at 78.4% of GDP in 2025/26 and is projected to decline to 76.6% by 2029/30. The primary budget surplus reached R80.8 billion, equivalent to 1% of GDP in 2025/26 and is expected to increase from 1.7% of GDP in 2026/27 to 2.9% by 2029/30. If the MTBPS indicates the falling of debt and projects the continuation of this decrease, why introduce the stringent law of fiscal anchors? NEHAWU will therefore oppose the legislation to introduce such discredited draconian fiscal rules.
Another naïve and typical Neoliberal fiscal policy straightjacket is the announcement of the fast-tracking of the privatisation of service delivery at the municipal level, through so-called Public Private Partnerships (PPPs). The Minister unashamedly announced that there are about 31 municipal projects through which the infrastructure and service delivery responsibilities of the state would be handed over to the for-profit private sector. This has been accelerated through amendments to the Municipal PPP Regulations in Parliament. The privatisation of service delivery in municipalities represents an abdication by the state of the Constitutional responsibility for providing our people with basic services. This would only serve to deepen unemployment, inequality and poverty as more resources would by syphoned-off by the tenderprenuers as these constitutionally guaranteed basic services would now become more expensive and unaffordable.
Gross tax revenue for 2026/27 has been revised upwards by R17.1 billion compared with the February estimate, largely reflecting stronger corporate income tax, dividends tax and VAT collections. However, part of the improvement reflects higher commodity prices and may not be sustained over the medium term. Sustainable domestic revenue mobilisation therefore remains essential.
The main budget revenue for 2026/27 is R54.1 billion higher than projected in the 2026 Budget when tax and non-tax revenue and National Revenue Fund receipts are included. NEHAWU supports a more efficient and progressive tax system and the strengthening of the South African Revenue Service to improve tax collection and customs enforcement, especially against the elites, many of whom tend to be involved in schemes geared at dodging tax and capital flight.
PUBLIC SERVICE AND THE WAGE BILL
NEHAWU vehemently rejects the tendency by National Treasury to continue to treat the public service wage bill as an expenditure problem. Spending of the salaries of the 1.2 million public servants is an investment, which also has multiplier effects on aggregate demand to stimulate economic growth. Public servants are central in the delivery of healthcare, education, social protection and public administration. Reducing staffing levels or constraining remuneration without considering service-delivery requirements weakens the capacity of the state.
The proposed early retirement and voluntary exit measures expected to generate average annual “savings” of R4.4 billion, must be assessed against their implications for staffing, institutional knowledge and service delivery. Savings cannot be considered beneficial if they widen vacancies, increase workloads and weaken the already constrained institutions.
The wage bill must also be considered against inflation. Under the current public service wage agreement, salary adjustments are set at 4% for 2026/27 and 2027/28 in which inflation is projected to fall below the 4%. This does not translate into any real increase. On the other hand, the MTBPS 2026 presents the public service wage bill that is set to increase by an average of 3.8% over the medium term and it reiterates the fiscal policy stance of continuing to enforce austerity measures in the public service.
NEHAWU calls for the development of a comprehensive workforce plan targeting critical skills and service-delivery requirements. Fiscal sustainability should be strengthened through improved revenue collection, responsible financial management and the elimination of wasteful expenditure rather than the ongoing disproportionate targeting of the public service dispensation.
HEALTHCARE
The 2026 MTBPS indicates that consolidated health expenditure is projected at R311.3 billion in 2026/27, increasing to R322.8 billion in 2027/28, R335.4 billion in 2028/29 and R345.5 billion by 2029/30. This represents an average annual growth of 3.5% over the medium-term, which is obviously below the projected inflation rate. Furthermore, the 2026 MTBPS allocates an additional R20.5 billion to the provincial equitable share over the medium term to compensate provinces for increased costs in healthcare and basic education. Although this funding is shared between the two sectors, it is an important intervention given the financial pressures faced by provincial departments responsible for delivering frontline healthcare services in particular. Hence, we reiterate our call for the absorption of more Community Health Worker (CHWs).
The allocation of R1.6 billion over the medium term for pre-birth care and the first 1,000 days of life is welcomed. However, this investment must be supported by adequate healthcare personnel, accessible antenatal services and functioning facilities to improve maternal and child health clinical outcomes. Additional allocations to provinces must address the costs of employing healthcare professionals, procuring medicines and maintaining infrastructure. NEHAWU calls for funded vacancies to be filled, improved staff retention and sufficient operational budgets.
The 2026 MTBPS also proposes measures to improve the management of health sector compensation expenditure. National Treasury indicates that improved management of commuted overtime could create opportunities to employ additional doctors in provinces, reduce workloads and improve access to healthcare.
As NEHAWU, we are particularly concerned about the implications of staff shortages in our public hospitals which already experience high patient volumes, long waiting times, heavy workloads and infrastructure deficiencies. These challenges have been evident at Helen Joseph Hospital and Rahima Moosa Mother and Child Hospital in Gauteng, amongst others, both of which have attracted public attention over concerns around service delivery and patient experiences.
Medico-legal claims also remain a significant crisis. The 2026 MTBPS reports that medico-legal contingent liabilities declined from approximately R110 billion in 2019/20 to R50.6 billion in 2025/26. Despite this reduction, the liabilities remain substantial and continue to pose risks to provincial health budgets. Funds used to settle medico-legal claims represent resources that could otherwise support the employment of healthcare professionals, procurement of medicines and maintenance of facilities. Strengthening patient safety, clinical governance, medical-record management and accountability is therefore essential to reducing these financial risks. We cannot over emphasise the importance of compliance with the provisions of the health and safety laws to prevent unsanitary conditions from which many of these legal liabilities arise.
The 2026 MTBPS also announces funding measures to sustain HIV and AIDS services following the withdrawal of funding from the United States President’s Emergency Plan for AIDS Relief (PEPFAR). National Treasury indicates that R556.7 million will be reprioritised over the medium term, supplementing the R3.8 billion reprioritised through the district health programmes grant. This is an important intervention to support the continuity of HIV and AIDS services. However, the adequacy of these resources must be assessed against the scale of the funding gap and the implications for healthcare workers, community-based programmes and patients who depend on these services.
The fiscal outlook also has important implications for the implementation of National Health Insurance (NHI). The NHI Act envisages the reorganisation of healthcare financing and purchasing to advance more equitable access to healthcare services. However, its effective implementation depends on the capacity of the public healthcare system to provide accessible and quality care. This requires sufficient healthcare professionals, functional facilities, effective administration, reliable procurement systems and adequate funding for the day-to-day delivery of services. NEHAWU is not convinced that government is currently embarking on the required measure of health system strengthening in preparation for the NHI.
SOCIAL SECURITY
National Treasury has once again missed an opportunity to increase vital security nets, in particular regarding the COVID-19 Social Relief of Distress (SRD) Grant. In fact, the Minister has indicated that any serious consideration for the introduction of a universal Basic Income Guarantee (BIG) has been completely abandoned.
The MTBPS also indicates that National Treasury will be “saving” R13 billion from reducing fraud in social grants through an enhanced biometric enrolment and beneficiary verification. These are not “savings”; these are Neoliberal instruments implemented to limit the number of successful beneficiary applications – with the MTBPS projecting that the number of social grant beneficiaries will decline from 17.8 million in 2026/27 to 17.1 million by 2029/30.
For many South Africans, the SRD Grant, which falls far below the Extreme Poverty Line, is a life-line in the face of increases in the cost of food, electricity, water and petrol. It is therefore shameful that National Treasury cannot comprehend the plight of our people. The Institute for Economic Justice (IEJ) has previously highlighted the erosion of the Child Support Grant’s value relative to the Food Poverty Line – which underlines the fact that the grant has declined from approximately 90% of the Food Poverty Line in 2006 to around 70% in 2025. This illustrates the inadequacy of social assistance in meeting basic nutritional needs, particularly regarding children.
The 2026 MTBPS acknowledges the seriousness of child malnutrition, reporting that 28.8% of South African children are suffering from stunting. This has devastating consequences and in fact several provinces have reported cases of Sever Acute Malnutrition (SAM). Last year, the Eastern Cape alone was reported by the South African Human Rights Commission to have had about 177 children dying from SAM over a period of 18 months. This is indeed scandalous and disgraceful.
Social development expenditure is projected to increase from R437.4 billion in 2026/27 to R481.3 billion in 2029/30, averaging 3.2% growth per year, in real-terms this amounts to a R6.8 billion cut in the medium-term. Social-wage spending accounts for 60% of non-interest expenditure, including free basic water, sanitation, electricity and refuse removal for more than 11 million households. This however must be measured with the fact that only 2.8 million households have access to an indigent policy.
NEHAWU remains firm in calling for a universal Basic Income Grant as the Treasury has failed to provide a robust and sustainable strategy to address the appalling rate of poverty in South Africa. It is now 32 years into our democracy and freedom, yet the new generation that is born into this democracy finds itself in a country in which about two-thirds of the people still live on less than R3000 a month. In fact, almost half of this new generation, our youth who are between 15 and 34 years old are unemployed. This is the scandalous extent of the rates of poverty and unemployment in our country. The pensioners receive only about R2400, which is below the poverty line, and yet it is them that have literally carried this country on their backs during the dark days of the Apartheid oppression.
POST-SCHOOL EDUCATION AND TRAINING
NEHAWU maintains that the post-school education and training system is essential for industrialisation, technological advancement and economic transformation. Hence, we call for sustained increments in budget allocations. Financial exclusion, student accommodation shortages, infrastructure backlogs and funding pressures continue to constrain access and the quality of education. The MTBPS projects post-school education and training expenditure to increase from R157.7 billion in 2026/27 to R177.2 billion in 2029/30, an average annual increase of 4%.
The union calls for predictable and adequate funding for universities and TVET colleges, alongside a properly funded National Student Financial Aid Scheme (NSFAS). Student support must adequately address tuition, accommodation, transport, learning materials and food. The MTBPS itself identifies NSFAS as a material expenditure risk because spending requirements exceed the resources available within the higher-education baseline, which we reject.
Underinvestment in education weakens human resource development and constrains potential and long-term growth. TVET colleges have a particularly important role in developing technical and vocational skills required by productive industries and improving the connection between education, industrial development and employment.
Skills development must respond to South Africa’s industrial and technological requirements while providing young people with recognised qualifications and sustainable employment opportunities. Education expenditure must therefore be treated as a strategic investment in productive capacity, industrialisation and employment creation rather than simply an expenditure item to be constrained.
END
Issued by NEHAWU Secretariat.
Zola Saphetha (General Secretary) at 082 558 5968; Welcome Mnisi (1st Deputy General Secretary) at 082 455 2897; Baxolise Mali (2nd Deputy General Secretary) at 066 305 0591 or Lwazi Nkolonzi (NEHAWU National Spokesperson) at 081 558 2335 or email: lwazin@nehawu.org.za