Economists Predict Enoch Godongwana Will Unveil New Inflation Target At Mid-Term Budget

Speculation is mounting that Finance Minister Enoch Godongwana may use the upcoming Medium-Term Budget Policy Statement (MTBPS) to unveil South Africa’s new inflation target.

Ratings agency Fitch recently suggested that the National Treasury could soon announce the revised target, which the South African Reserve Bank (SARB) would then be tasked with implementing.

This comes after the SARB’s Monetary Policy Committee (MPC) stated in July that it would begin focusing on the lower end of the existing 3–6% inflation target range with immediate effect.

Impact and Legacy of South Africa’s Current Inflation Target

South Africa’s 3–6% inflation target has been in place since 2000 and has served as a key anchor for inflation expectations. High inflation weakens a nation’s currency, making it essential for central banks to maintain price stability to preserve value.

Visiting Professor at Wits University, Jannie Rossouw, says the current target range has been instrumental in stabilising the economy.

“The inflation target announced in 2000 served South Africa well and has brought down both the inflation rate and inflation expectations to within the target range of 3 to 6%.

“Around 2001, there was an attempt to introduce a lower target range of 3 to 5%, but that never materialised as a result of international financial uncertainty, so we’ve had an inflation target range of 3 to 6% for this whole period.”

Economists say this system has provided a crucial sense of predictability, particularly for businesses. Dr Elna Moolman, Head of South African Macroeconomic, Fixed Income and Currency Research at Standard Bank, highlights its value for economic planning.

“If I’m a business, I know that inflation will be somewhere between 3 and 6% and then I can plan around it… the big advantage is that it makes it easier to invest and run your business.”

Calls for a Lower Inflation Target Gain Momentum

Although the SARB has declared its focus on the lower end of the target range, it is ultimately the Treasury’s role—working with SARB expertise—to set and announce official inflation targets.

Professor Rossouw supports tightening the target range further, suggesting a 3% midpoint with a 2–4% band.

“I’m in favour of a 3% inflation target, but with a range of 1 PPS on either side, 2 to 4%, and so I support the SARB targeting 3%. We need the government to support this target, so my hope is that the finance minister will announce the 3% target at the upcoming Medium Term Budget Statement on the 12th of November.”

He warns that failing to align Treasury and SARB policies could create confusion.

“If the finance minister doesn’t announce it, we can end up in the dangerous situation where the Reserve Bank targets inflation at 3% and the Treasury uses 4.5% in fiscal planning… South Africa cannot afford that.”

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Whether Godongwana makes the official announcement this week remains uncertain. However, Dr Moolman notes that broad support from various sectors will be vital to ensure long-term success.

“It’s unfortunately still difficult to know whether he’ll make the final call now or whether he’ll just give us further guidance… the more we have buy-in, the more everybody in the economy believes this is achievable, the easier it will be to actually achieve that on a sustainable basis.”

Even if the announcement is delayed, both Treasury and the Reserve Bank have indicated that the policy groundwork has been completed—suggesting that a formal confirmation could arrive in the near future.

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