Finance Minister Enoch Godongwana's 2026 Budget speech [25 February 2026] is likely to "hold the line" and avoid delivering any unpleasant tax shocks in a local government election year.
A more stable national balance sheet and positive economic signals that started in 2026 will be weighed against persistently stagnant economic growth, high unemployment and global economic upheavals, but the Minister's commitment to pursuing a primary budget surplus and lowering the high government debt-to-GDP ratio leaves little room for an "expansionary budget stance".
Prof Andre Roux, economist at Stellenbosch Business School, described the annual Budget as a balancing act in which "economic and fiscal prudence competes with political expedience".
Following the repeated and embarrassing postponement of the 2025 Budget speech, he said he expected the Budget process this year to be far more inclusive and transparent.
"The local government elections lying ahead make any major tax or expenditure changes unlikely, while low growth expectations inhibit organic growth in tax revenue, although the high gold price should deliver a small corporate tax revenue windfall," says Prof Roux.
"All in all, no major surprises are expected. For the time being, given the looming local elections, the contentious VAT rate will probably remain unchanged (although all bets are off regarding next year). Nor is the Minister expected to adjust personal income tax rates - at least not visibly."
"By again not making a full adjustment for bracket-creep the Minister may covertly subject personal income taxpayers - especially those in the middle-income bracket - to an effectively higher burden," he said.
Although tax revenue may be boosted by the higher gold price, this is unlikely to be sufficient to plug all the gaps, and Prof Roux said he expected the Finance Minister to call for greater tax collection efficiency by the SA Revenue Service (SARS), along with announcing the expected increase in the various "sin taxes".
"On the spending side, it would be politically and socio-economically ill-advised to reduce transfer payments to unemployed, impoverished households. The social relief of distress grant (SRDG), introduced to provide temporary financial relief during the COVID-19 pandemic, is expected to be renewed for another year, with possibly a small upward adjustment."
"However, the oft-touted expansion of the reach of the grant and/or the introduction of a universal income grant is likely to be put on the back-burner as it is simply not affordable at this stage," he said.
"Political expedience" would likely preclude the freezing of civil servant salaries, while the Minister would also underline the importance of eliminating wasteful, unproductive, and unaccounted for spending as a means towards curbing expenditure increases.
"The overall structure and inclination of government expenditure is not expected to change materially. While understandable, this is also regrettable. Some two-thirds of total consolidated government expenditure is allocated to compensation of employees, interest and rent on land, and household transfers.
"This means that close to 70% of all tax paid directly or indirectly by economic subjects is destined to finance current expenditure. By contrast, barely five percent of government spending is used to finance much-needed economic infrastructure (roads, bridges, dams, electricity, and the like). This translates into less than 1.5% of GDP; while according to World Bank analyses developing countries require investments of 4.5% of GDP in infrastructure to meet their development goals," Prof Roux said.
On the positive signals underpinning the 2026 Budget, he said that for the first time in more than a decade, South Africa had started the year "on a slightly more positive note than usual" - with the gold price riding high and the rand-dollar exchange rate at its strongest level since 2020.
"Inflation expectations have moved to a target many would have deemed impossible just a few years ago; and interest rates are being managed downwards with circumspection. In recognition of these favourable developments, in November last year Standard and Poor's upgraded South Africa's long-term currency rating to a positive outlook; the first upgrade in more than 15 years."