RAYMOND PARSONS

The highly anticipated 2026 budget on February 25 also coincides with the 90th anniversary of the publication of a path-breaking book that decisively influenced fiscal policy for nearly a century.

It was called The General Theory of Employment, Interest and Money and was published in February 1936 by the then already famous British economist John Maynard Keynes. It posed a major challenge to orthodox thinking on how to handle recurring “booms” and “slumps” in economic activity.

Keynes strongly advocated a proactive role for governments in addressing the large swings in the business cycle that dominated the highly uncertain interwar period and the Great Depression.

At the centre of Keynes’s analysis was his crucial emphasis on the persistent phenomenon of uncertainty in capitalist economies. He placed confidence and expectations at the heart of economic thinking and outcomes. This now firmly resonates with the pervasive “era of uncertainty” which both the global and local economies have acutely experienced in recent years.

Indeed, esteemed financier Warren Buffett has said that he regularly advises policymakers and investors to again read chapter 12 of The General Theory on “The State of Long-Term Expectation” for its modern relevance. And Keynes’s consequent description of what he famously described as the necessary key “animal spirits” of the business community — an urge to action rather than inaction — remains highly pertinent to South Africa as the next budget looms. So, what must South Africa expect from the pending budget?

It is not just a question of “balancing the books” — the budget needs to concretise the state of the nation address’s message in tangible and confidence-building ways.

The economic and fiscal “curtain-raiser” to the budget was already set out in the November 2025 medium-term budget policy statement (MTBPS). The MTBPS outlook has since been reinforced by several well-known positive economic developments.

Finance minister Enoch Godongwana will certainly have better fiscal metrics to present in the 2026 budget than a year ago, when the National Treasury had its back to the wall both fiscally and politically over the proposed controversial VAT increases.

Although big socioeconomic challenges remain, ranging from high unemployment to poor service delivery, South Africa must now capitalise on the better economic news. It is not just a question of “balancing the books” — the budget needs to concretise the state of the nation address’s message in tangible and confidence-building ways.

“Confidence-building is the cheapest form of economic stimulation” is a well-recognised phrase. But the economy is not on autopilot, and disappointed expectations can easily still become self-fulfilling. The 2026 budget must therefore credibly “crowd in” private sector investment, not merely be a fiscal statement.

“A final danger of pessimism,” the UK’s The Economist said recently, “is that it undermines fiscal discipline.” In other words, when taxpayers and voters are negative, their tolerance for short-term pain drops. South Africa’s policy of fiscal consolidation inevitably involves difficult and painful trade-offs. The overall benefit of building confidence in fiscal sustainability through higher inclusive growth is not only that it strengthens resilience, but it also makes other socioeconomic goals easier to attain.

Post-budget, a sufficient number of companies must feel that the policy environment and growth prospects justify their making fresh plans for expansion.

The budget speech must therefore seize the moment and compellingly “package” the elements of stability, recovery, and, especially, the real deep reforms now needed. This must drive fiscal strategy in general and, in particular, underpin the GNU’s job-rich GDP growth target of 3.5% by 2030.

The latest Business Leadership South Africa reform tracker delivered an overall positive message but also indicated that reform momentum had slowed. The uncertainty that presently still prevails around Eskom’s unbundling again stresses why growth-friendly reforms must be seen as irreversible. Realistic timelines need to be enforced.

Post-budget, a sufficient number of companies must feel that the policy environment and growth prospects justify their making fresh plans for expansion. Much higher levels of fixed capital formation are now needed if the modest MTBPS projection of 1.8% growth over the period 2026-28 is to surprise on the upside.

What the 2026 budget must now therefore help to define is a distinct future trajectory for the economy. Although this overall task ultimately rests on the political economy dynamics of the GNU as a whole, the Treasury has a particular policy bias towards making and encouraging decisions that lead to long-term benefits, rather than short-run solutions.

A clear and predictable policy environment, strongly supported and reinforced in the budget, will boost the business sector’s “animal spirits” needed to take the necessary long-term perspective on growth and development.