Budget balance widens alongside the rise in the jobless rate
- South Africa was already operating one of the largest social grant systems in the developing world, serving millions of children, elderly and disabled.
- The new grant, launched in 2020, extended support to working-age adults – the group hit hardest as lockdowns wiped out jobs. Meant as a temporary measure, the grant has been repeatedly extended as the labor market stays weak and the economy struggles.
- Unemployment pressures are set to intensify further. New US tariffs and rising competition from Asian imports are likely to hurt local manufacturers. South Africa faces the continent’s highest levy — 30% — which will hit its automotive and agriculture sectors particularly hard.
- Local carmakers, already squeezed by rising imports from Asia, have announced jobs cuts. A major steelmaker plans to close this year due to high costs, logistical bottlenecks, and import competition, eliminating more than 3,000 jobs.
- Weaker-than-expected growth will cut tax revenue, with tariff-hit sectors and a rising jobless rate adding to the shortfall. At the same time, spending on social grants is likely to rise as more of the unemployed qualify for support.
- As a result, the consolidated budget deficit will likely exceed the government’s planned 4.8% of GDP for this year and 3.8% next year, delaying the stabilization of public debt – which stood at 76.9% of GDP in March – beyond 2026.
