IN SHORT: South Africa’s National Treasury reported that the country achieved a primary budget surplus of R86.7 billion, equivalent to 1.1% of GDP, for the 2025/26 fiscal year, exceeding the 0.9% Budget estimate. It is South Africa’s third consecutive primary surplus. The main budget deficit narrowed to 4.3% of GDP, better than the projected 4.6%. Government debt is expected to peak in 2025/26 before declining to 76.5% of GDP by 2028/29. Separately, Eskom posted a R24.3 billion profit in the first half of 2026, following a R16 billion profit in 2025, and South Africa has now gone more than 365 days without load shedding. Moody’s recently revised South Africa’s outlook to positive, while S&P Global reaffirmed its positive outlook after upgrading the sovereign rating in November 2025.
South Africa’s fiscal and structural reform story reached a milestone as the National Treasury confirmed a third consecutive primary budget surplus of R86.7 billion for 2025/26, alongside Eskom’s return to sustained profitability and more than a year without load shedding, evidence that the country’s macroeconomic turnaround is broadening from a fiscal discipline narrative into an operational one that touches the electricity supply which had constrained growth for over a decade. The Treasury’s disclosures, made by Director-General officials in late June, reinforce the credit rating trajectory that saw S&P upgrade South Africa in November 2025 and Moody’s move to a positive outlook.
- The R86.7 billion primary surplus, at 1.1% of GDP, exceeded the 0.9% Budget estimate and represents the third consecutive year South Africa has run a primary surplus, meaning revenue exceeds non-interest expenditure. The primary surplus is the key metric for debt stabilisation: it demonstrates that the government can fund its operations without borrowing, with new debt required only to service existing interest obligations. The trajectory from R33 billion in 2023/24 to R86.7 billion in 2025/26 shows the surplus more than doubling in two years.
- The main budget deficit narrowed to 4.3% of GDP against a projected 4.6%, and is forecast to decline to 3.1% by 2028/29. Government debt is expected to peak in 2025/26 at approximately 78.9% of GDP before declining to 76.5% by 2028/29, the first sustained stabilisation and reversal after more than a decade of continuous debt accumulation. South Africa’s borrowing costs have fallen: domestic government bond yields declined by an average of 240 basis points between the 2025 and 2026 Budgets, and five-year Eurobond spreads narrowed from 170 basis points before the Middle East conflict to 106 basis points.
- Eskom’s turnaround is the operational counterpart to the fiscal story. The utility posted a R24.3 billion profit in the first half of 2026, following a R16 billion profit in 2025, its second consecutive year of profitability. The turnaround was attributed to operational improvements, higher tariffs and the conditions attached to the government’s debt relief package. Most significantly, South Africa has now gone more than 365 days without load shedding, ending the rolling blackouts that had defined the country’s economic constraints since 2007.
- The end of load shedding has direct GDP implications. Various estimates placed the cost of load shedding at between 0.5 and 2 percentage points of GDP growth per year during the worst periods. Removing that constraint is a structural improvement to South Africa’s growth potential, not a cyclical one. NERSA has registered more than 19 gigawatts of new generation capacity, much of it private renewable energy, which provides the supply cushion that makes continued load-shedding-free operation sustainable.
- The fiscal outperformance funded the R17.2 billion temporary fuel levy relief that cushioned South African households through the Hormuz conflict period from April to June. Treasury described the relief as fiscally neutral, funded from the fiscal outperformance of the previous year rather than from new borrowing or spending cuts. This is the practical benefit of fiscal discipline: it creates the capacity to respond to external shocks without compromising the debt trajectory.
- The credit rating agencies have responded to the trajectory. S&P Global upgraded South Africa’s sovereign rating in November 2025, the first upgrade in nearly two decades, and reaffirmed its positive outlook. Moody’s revised its outlook to positive. Fitch’s June upgrade completed the trio of major agencies moving in the same positive direction. This ratings momentum reduces South Africa’s borrowing costs and signals to international investors that the country’s macroeconomic management has fundamentally improved.
The fiscal and operational good news arrives at exactly the moment when South Africa’s political and social stability is under strain from the June 30 anti-migrant protests. The contrast is stark: the country’s economic managers have delivered a genuine turnaround in fiscal discipline, electricity supply and credit ratings, while its political and social environment faces the most significant instability in years. Whether the economic gains can be sustained depends partly on whether the political environment stabilises enough to preserve the investor confidence that the fiscal and operational improvements have earned.
The Bigger Picture: South Africa’s R86.7 billion primary surplus and Eskom’s return to profit represent the two hardest problems in the South African economy being addressed simultaneously. For over a decade, the twin constraints on South African growth were fiscal deterioration and electricity supply failure. Both are now moving in the right direction at the same time: three consecutive primary surpluses, a stabilising debt ratio, a return to Eskom profitability and more than a year without load shedding. This is the foundation on which sustainable growth is built. The missing piece remains growth itself, still forecast at only 2% by 2028, and employment, with unemployment at 32.7%. Fixing the fiscus and the electricity supply were necessary conditions for faster growth. They were never sufficient on their own. The next reform frontier is the product and labour market changes that convert macroeconomic stability into jobs.
