As Finance Minister Enoch Godongwana prepares to deliver South Africa’s 2026 Budget speech on Wednesday, 25 February 2026, expectations are firmly anchored around stability rather than surprise.
Source: Flickr/GovernmentZA; SA Finance Minister, Enoch Godongwana.
With local government elections looming, analysts anticipate a cautious fiscal approach that avoids major tax hikes while reinforcing government’s commitment to discipline.
Although early economic signals in 2026 have shown modest improvement, stagnant growth, stubbornly high unemployment and global uncertainty continue to weigh heavily on policy choices. A stronger national balance sheet offers some breathing room, but the drive to secure a primary budget surplus and curb rising debt leaves little scope for expansionary spending.
André 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 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.
Revenue tweaks ahead
Although tax revenue may be boosted by the higher gold price, this is unlikely to be sufficient to plug all the gaps, and 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- ervant 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,” Roux said.
Markets show strength
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.
“South Africa’s removal from the Financial Action Task Force (FATF) grey-list last October, should bolster the country's global financial reputation, and could help to restore investor confidence,” he said.
However, several firmly entrenched structural concerns and constraints remain, including SA’s persistent low economic growth (1%) and chronically high unemployment.
“Since the economy is growing at a slower speed than the population, this means that in real terms the GDP per capita today is about 7% lower than in 2013, and only 3% higher than in 1981 – four and a half decades ago.
“The fact that the prospect of a 2% growth rate over the next year or two evokes a mild sense of elation is a lamentable indictment of our fatalistic disposition towards the domestic economy. We require a sustained growth path of at least 4% to co-produce meaningful macro-economic and socio-economic progress,” he said.
Weak growth drivers
Economic growth over the past 15 years has been muted by the strain on consumers, he said, which is to be expected with more than 60% of gross domestic product (GDP) derived from consumer spending in an environment of tight household budgets.
The high proportion of low- and no-income households, high levels of household debt and costs of servicing debt, a heavy tax burden on middle-income earners and rising food and fuel prices all contribute to the strain on consumers.
“Meanwhile, fixed investment spending (often dubbed the “engine of growth”) has been subdued for 15 years, reflecting the reluctance of the corporate sector to make a commitment to what they perceive to be a risky future,” he said.
“A consistently sensible fiscal policy stance, as reflected in the annual budget speech, can play a meaningful role – directly or indirectly - in creating and propagating some of the key requirements for inclusive growth and human development.
“Foremost among these are the enhancement of the country’s global competitiveness, the accumulation of social capital (including mutual trust, and the entrenchment of a shared and plausible long-term vision), restraining the magnitude of a variety of deficits, the promotion of appropriate skilling and training across the entire spectrum of educational institutions, and the restoration of the competence and integrity of our democratic institutions,” he said.
