Budget pressures for Gauteng: Analysis of the 2025/26 MTBPS

Setting the scene

In late November 2025, the Gauteng Provincial Government (GPG) presented its 2025/26 Medium-Term Budget Policy Statement (MTBPS) in a context of ongoing economic weakness and fiscal consolidation. Using data from the original Budget 2025/26 and the mid-year 2025/26 national and Gauteng MTBPS, this Interactive Visualisation highlights key expenditure and revenue pressures facing the GPG that arise from this context. The analysis below, illustrated with a series of interactive maps and graphs, seeks to do the following:

• Understand the context facing the GPG, particularly as it relates to economic and fiscal constraints and a slow-growing share of nationally raised revenue;
• Present overall spending projections, and compare these to overall current and forecasted inflation and population growth rates;
• Summarise the principles that the Gauteng MTBPS sets out in response to budget constraints;
• Explore key budget changes at the departmental level, noting in particular the limited budget growth envisaged for the largest departmental budgets;
• Given the challenges, identify key areas for future GCRO research and policy analysis.

In overall terms, our analysis of context, and shifting budget parameters, suggests that even with a considered strategic response from the GPG core public services may face significant budget pressures in the Medium Term Expenditure Framework (MTEF) period ahead.

Gauteng in context

The Gauteng Province is South Africa’s most economically significant and populous province, accounting for 33% of Gross Domestic Product (GDP), 32% of total employment and 25.4% of the national population (Gauteng Provincial Treasury, 2025b). In the frame of the national economy Gauteng plays a central role, but like other provinces the Gauteng Provincial Government has a limited economic and fiscal toolset to undertake strategic interventions. This section discusses the broader economic and fiscal context that determines GPG’s budget parameters, and then examines the Provincial Equitable Share (PES).

South Africa is classified as an upper-middle-income country but lags behind its peers in terms of economic growth. The original 2011 National Development Plan envisaged economic growth of approximately 5% and unemployment moving close to 10% in 2025 (National Planning Commission, 2011). Clearly these projections were unrealistically optimistic. Between 2020 and 2024, upper-middle-income economies grew by an average of 4.8%, while South Africa grew by just 1.8% (World Bank, 2025). The low levels of economic growth have implications for tax revenues, and consequently amounts available for distribution.

The national gap between projected growth and employment and what has actually materialised is mirrored at a provincial level. Gauteng’s policy objectives, contained in the Growing Gauteng Together 2030 strategy (Gauteng Provincial Government, 2020), envisaged a decade of strong economic growth and increased employment. However a recent review by the Gauteng Provincial Treasury highlighted low economic growth of under 2%, fiscal consolidation and high levels of unemployment (31.9%) as core challenges for Gauteng (Gauteng Provincial Treasury, 2025c). The 2025 Medium-Term Budget Policy Statement for the Gauteng Provincial Government (Gauteng MTBPS) includes stabilising public finances through fiscal discipline, budget credibility, and efficient service delivery.

However, these policy objectives face three key challenges.

First, an important contextual challenge is that provinces cannot shape national policy choices that invariably weigh on their budgets. Salaries for health workers and educators, for example, make up a major portion of the provincial budget and are subject to centrally negotiated salary increases through collective bargaining. According to the 2025/26 Gauteng Budget Speech (Gauteng Provincial Treasury, 2025a), the aim is to keep employee compensation below 60% of overall expenditure but the room for manoeuvre here is limited.

Salary costs are not the only area where budgets are spent provincially, but determined nationally. The formula for transfers for schools is another example. It distinguishes schools based on the sociodemographic data of areas seeking equity between richer and poorer areas. In practice, many challenges arise including the unequal conditions between schools (Hassen et al., 2025; Maistry & Africa, 2020).

Second, as an outcome of national economic growth and tax collection, both of which remain weak, budgets across all provinces are projected to decline in real terms (i.e. once inflation is factored in) over the medium term (from 2025/26 to 2028/29). The GPG budget will see an approximate increase of 2.5% from 2024/25 to the 2028/29 fiscal years. As discussed in more detail below, this means that even under very optimistic assumptions of inflation at 3% or lower, the Gauteng budget will therefore experience a decrease in real terms in the years ahead. This is while its major costs such as salaries increase at inflation-adjusted or even above inflation levels. This is not unique to Gauteng since budgets for all other provinces are projected to experience similar real declines, after adjusting for inflation.

The National Treasury argues that its “inclusive growth” approach both consolidates spending while extending basic service delivery (National Treasury, 2025a). The National Treasury’s approach to consolidating spending is associated with a series of structural reforms and reprioritisation in the economy, which it argues will lead to economic growth and an expansion in services (National Treasury, 2025a). There is significant debate on the salience of this strategy, specifically whether a greater stimulus is needed and the implications for employment and poverty reduction (Sachs, 2019; Sibeko & Isaacs, 2019).

Traditionally, contestation over the budget in South Africa has focused on policy choices at the national level, with limited references to provincial challenges and constrained choices (Ajam, 2014). A way to deepen the national debate is to understand provincial and local perspectives, although there is a paucity of studies focussed on the regional government level in developing countries in general and South Africa in particular (Alm & Martinez-Vazquez, 2015; Roos, 2020). Here it is worth highlighting that Gauteng accounts for the largest shares of the population and the economy, and below-inflation growth in its spending will have significant implications across other provinces. To illustrate, reductions in infrastructure spending in Gauteng have national implications. The Gauteng road network is critical to linking goods to markets across the country. Similarly, Gauteng schools enrolment data shows over 100 000 learners migrating per year from 2017 (Chiloane, 2025).

Third, provinces have limited powers to collect own-tax revenue, with their budgets predominantly funded by transfers from the national fiscus. Transfers into provincial budgets include the Provincial Equitable Share (PES) and conditional grants earmarked for specific purposes. The PES, an unconditional allocation, is determined by a formula that accounts for demographic trends, measures of poverty, and service delivery needs. Because of the way the formula works some provinces are seeing stronger growth in their equitable share over time, others weaker. Here, relative to other provinces, the medium term does not look optimistic for Gauteng.

Figure 1 and Figure 2 should be read together. Figure 1 maps the projected growth in PES between 2025/26 and 2028/29. Readers can hover over the map to see the actual compound annual growth rate (CAGR) (National Treasury, 2025b), as well as the total share of the PES going to each province and each provinces’ proportion of the national population (Statistics South Africa, 2025). Figure 2 also gives the picture for the recent past, with the CAGR for the equitable share going to each province between 2020/21 and 2025/26 using data from successive annual national Medium Term Budget Policy Statements.

It is clear that while the PES for Gauteng grew reasonably strongly over the last five years at 5.1%, future growth is far lower at just 2.51%. By contrast provinces such as the Western Cape, KwaZulu Natal, Mpumulanga, Limpopo, and the Northern Cape are all above 3.5%. These changes are primarily due to adjusted population growth estimates from Census 2022, where Gauteng’s growth rate was found to be lower than that previously projected.

Figure 1. Projected growth in Provincial Equitable Share and population share

Figure 2. Equitable share allocation and growth rates per province (2020/21 to 2028/29)

Overall spending projections

South Africa’s budget is not growing due to low economic growth (with the consequence of lower taxes) and the need to stabilise debt. The impact of macroeconomic choices plays out at the provincial level, specifically in terms of frontline service delivery. The graph below compares the projected increase in the Gauteng budget with projected population growth and inflation. The data shows that projected increases in budgets will be in line with anticipated population growth, but lower than the inflation target. The combination of population growth and inflation is likely to result in a real decline in budget.

Figure 3. Projected growth rates for budget, population and inflation for Gauteng

One way to understand the importance of this constraint is through a thought exercise. Figure 4 below starts in 2024/25 and compares two scenarios.

• The first scenario increases the budget by 3% to remain in line with inflation and is shown with the orange line.
• The second scenario is the current budget that is estimated based on MTBPS 2025 and the 2025/26 budget for Gauteng (blue line).

Note: The data in this graph is updated for 2025/26 using the Gauteng MTBPS, as forward estimates are not provided at a department level. All other values are taken from the Gauteng Budget 2025/26.

Figure 4. Gauteng MTBPS projection against a scenario of 3% budget growth.

While this exercise seems to show a worrying nominal decline from 2025/26 to 2026/27, one explanation is that forward estimates are not yet available. In the graph, data for 2025/26 is derived from the 2025 Gauteng MTBPS, but data for 2026/27 and 2027/28 is still from the original 2025/26 Gauteng budget passed earlier this year. It is possible that there will be an upward revision in Budget 2026/27 to be finalised in March 2026.

Nonetheless, the exercise points to tight budget constraints ahead, with the gap between projected spending and merely meeting inflationary pressures growing to R11 billion in 2027/28. The size of this gap reflects the real value of the budget eroding over time. It poses a significant challenge for government and in turn residents, especially those in communities wholly reliant on public services like healthcare and education. In the medium term the Gauteng Provincial Government will likely be under great pressure in trying to provide existing services at the requisite level of quality. To illustrate, Helen Joseph Tertiary Hospital was recently inspected by the Office of Health Standards Compliance and the Health Ombud and found to have poor infrastructure and staff shortages attributable to several factors, including declining budgets (Metelerkamp, 2025).

Gauteng government responses

As the analysis above has shown, the GPG budget is under great pressure as a result of a number of factors. These include low economic growth and limited tax capacity, budget choices at national and provincial levels, and revisions to population estimates driving reductions in the allocation to GPG through the PES formula. In such a fiscally constrained context, the Gauteng Provincial Treasury’s response is crucial to ensuring continued adherence to the notion of inclusive development.

In its MTBPS, the Gauteng Provincial Government stated 12 principles that will inform its response. Figure 5 below summarises our view of the GPG response encapsulated by those principles. In effect the GPG strategy is to use existing resources wisely, manage future risk and increase revenue sources. The strategy is thus consistent with a context of declining budgets at the national government and other provincial governments.

Figure 5. Visualising the Gauteng Provincial Government's budget principles

Four features of this approach are important to note from a service delivery perspective:

1. Accruals (commitments that need to be paid) will be settled first to avoid increasing provincial debt. The implication is that departments are likely to face even more stringent budgets in practice than that listed in the budget documents.
2. Managing risks is identified as a key area in the Gauteng MTBPS. GPG identifies several risks to the stabilisation of public finances. These include e-toll debt repayments, increasing accruals, and Gautrain Patronage Guarantee contractual obligations. In addition, payments related to the Life Esidemeni tragedy will receive an additional R40.8 million in the current financial year.
3. Future fiscal sustainability is a major theme, with an approach that seeks to raise more money and to enter into alternative financing arrangements. Similarly, there is a commitment to reducing spending on programmes, and even a commitment to closing some programmes.
4. Reprioritisation of budgets is a major theme of the MTBPS. It makes adjustments totalling R3.3 billion to address spending pressures. Moreover, the GPG has reallocated funds for infrastructure across its development corridors. In doing this, the provincial government aims to both reprioritise spending and ensure that distributional consequences of adjustments do not fall on the poor.

Amongst the mechanisms identified to achieve this are instruments aimed at:

• Evaluating spending more carefully and making decisions regarding whether pre-existing programmes should continue.
• Modernising government through digitalisation and automation, specifically in the procurement system.

Departmental spending trends

The lower than inflation increases in budget have implications for core services, especially in health and education, which receive the majority of the GPG budget. The budget data shows that education (39.7%) and health (39.2%) account for almost 80% of spending. This is followed by spending in departments providing infrastructure, which account for 11.5% of the total budget: Roads and Transport (5.9%), Human Settlements (3.5%), and Infrastructure Development (2.1%). Social Development accounts for 3.2% of total spending.

Figure 6. Share of total budget by Gauteng Provincial Government Departments (2025/26)

Though all departments will experience slow growth or decline in their budgets, it is important to understand the patterns. The following graph shows the annual growth rates for budget outcomes (2021/22 to 2024/25) and projected growth rates (2024/25 to 2027/28).

Figure 7. Budget allocation and annual growth rates for Gauteng Departments

Four features are highlighted in this graph:

1. Slow increase in education and health spending over the medium-term. Education is projected to increase slightly above the targeted inflation of 3%. Health is projected to increase by less than 1%.
2. Projected declines in budgets for Roads and Transport (-3.3%), Human settlements (-2.9%) and Infrastructure Development (-0.3%), raising concerns that maintenance and expansion projects will be limited.
3. The recent increase (44.8%) and then projected decline (-6.2%) in spending in the Department of Community Safety is primarily due to the employment of crime prevention wardens and subsequent closure of the project. The variability in the Department of Cooperative Governance, Traditional Affairs and Urban Planning is due to the discontinuation of projects related to the energy sector.
4. The departments of Provincial Treasury and Agriculture, Rural Development and Environment are the only two other departments that experienced recent growth in budgets with projections to grow further.

Further work

The GCRO will continue work on analysing provincial public expenditure. This initial analysis points to three main areas of research going forward:

1. Distributional impacts of budgets: The GPG makes choices in budgets, and understanding the impacts of these choices is a key area for future research. The analytical lens should be intersectional, and offer a way to understand spatial distributions with other determinants of inequality, especially race and gender.
2. Evaluating strategies across provinces: This analysis is for the GPG, but data is available across all provinces. Building linkages and communities of practice across provinces would strengthen comparative understanding and the sharing of analytical techniques.
3. Research on policy options: Analysis on how provinces may raise additional revenue and engage in alternative financing mechanisms needs to be undertaken. This is crucial given the risks associated with alternative financing arrangements.

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Suggested citation: Hassen E, Seedat R, Götz G, Bell J.F, Salijee A, Sango A and Mkhize T. (2025). Budget pressures for Gauteng: Analysis of the 2025/26 Gauteng MTBPS. GCRO Interactive Visualisation. Gauteng City-Region Observatory, 11 December 2025. https://doi.org/10.36634/UFID8489

Inputs, edits, and comments: Christian Hamann, Dr Laven Naidoo, Dr Samkelisiwe Khanyile and Yashena Naidoo