Weak household finances, slow economic growth and an already stretched tax base pose a risk to long-term fiscal sustainability, according to National Treasury director-general Duncan Pieterse.
While the government has made progress in stabilising debt and restoring fiscal discipline, the financial health of households remains a factor in determining the country’s long-term fiscal sustainability.
Speaking at the Momentum post-budget breakfast in Cape Town on Friday, Pieterse said the financial pressure on households limits the government’s ability to increase tax revenue while increasing demand for state support.
He said the biggest risk is low economic growth and that without higher growth it is difficult to improve revenue and reduce fiscal pressure.
According to the director-general, households were already heavily taxed, leaving little room for further tax increases without harming consumers and economic activity. He said the tax burden is already high and there is limited space to increase taxes further without affecting household consumption and economic growth.
“The idea that both corporates and households are quite overburdened from a tax perspective, and you can see it in our tax-to-GDP ratio, is something that we are very sensitive to and something that we continue to monitor,” he said.
This comes as finance minister Enoch Godongwana said in the 2026 budget speech that the government had made progress in stabilising public finances after years of deterioration.
The idea that both corporates and households are quite overburdened from a tax perspective, and you can see it in our tax-to-GDP ratio, is something that we are very sensitive to and something that we continue to monitor.
— Duncan Pieterse, National Treasury director-general
He said the budget deficit was narrowing and the government was maintaining fiscal discipline while debt-service costs were expected to ease over time.
“The consolidated budget deficit has narrowed to 4.5% of GDP for 2025/26, an improvement from 4.8% that we estimated in the 2025 budget. The deficit falls to 4% in 2026/27 and 3.1% the year after,” the minister said.
“Gross debt stabilises as a share of GDP in 2025/26, at 78.9%. In 2026/27 it falls further, to 77.3% of GDP and declines to 76.5% by 2028/29. The slightly higher debt peak this year reflects weaker nominal GDP growth and our decision to take advantage of strong investor demand in domestic and global markets by increasing issuance in 2025/26.”
However, weak household income growth and financial vulnerability continue to pose structural risks to the fiscus by limiting tax revenue and increasing reliance on social spending.
South Africa has nearly 27-million social grant beneficiaries, highlighting the extent of household financial vulnerability and the ongoing pressure on government spending.
Pieterse said improving economic growth was essential to strengthening public finances and reducing fiscal risks.
“Our growth is structurally low and when your growth is lower than population growth, which it has been for many years now, that creates a lot of pressure, because it means that spending growth cannot keep up with the needs of the population, and very, very tough choices need to be made, and that’s why a lot of our focus has been on, how do we accelerate growth?” he said.
Data from financial services group Momentum Corporate shows many households remain financially fragile, with low savings and high financial pressure, particularly among middle-income earners.
Taxpayers have had to shoulder the burden of corruption and state capture, having to pay more for basic services such as electricity and water. Rolling power blackouts and sabotage to water infrastructure have also led to an increase in food prices, which has led to a rising cost of living for all South Africans.
Momentum Corporate CEO Dumo Mbethe said South Africa’s savings rate remains far below the level needed to support long-term financial stability.
He estimates that South Africa’s savings rate is about 15% of GDP but to sustain higher levels of investment and economic growth it should be closer to 25%, he said.
Low savings increase the risk that households will depend on government support during financial shocks, placing additional pressure on public finances.
Momentum’s data also shows that only about 6% of South Africans are able to maintain their standard of living after retirement, highlighting widespread financial vulnerability, according to Mbethe.
Financially stressed households are more likely to rely on credit, reduce long-term savings and struggle to absorb financial shocks, increasing their dependence on government support over time.
This weakens the tax base while increasing demand for social spending, creating long-term fiscal risks.
Godongwana said strengthening economic growth was essential to securing South Africa’s fiscal future.
He suggested that faster, inclusive economic growth is the sustainable way to improve the country’s public finances, expand the tax base and reduce fiscal risk.
Business Day
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