On Wednesday last week, Finance Minister Enoch Godongwana took to the podium to present South Africa’s 2026/2027 Budget. In recent years, it has been an event that filled many of us watching with fear and trepidation. However, due to certain factors and developments (some within our control, others not), this year’s edition was ‘brighter than its been in a while’.
To set the stage, the Minister began with brutal honesty:
“Five years ago, the outlook was stark. State Capture had hollowed out critical institutions and weakened state-owned entities. South Africa had been downgraded to junk status by the last of the three major credit rating agencies in 2020. The devastation of the coronavirus pandemic coupled with the Russia-Ukraine conflict had dealt a blow to global growth. And in 2023, the Financial Action Task Force had placed South Africa on its grey list. The warning lights were flashing. Public finances were under severe strain and growth had stalled.”
After a brief pause, positivity took the place of poignance:
“Faced with this crisis, we chose not to be defined by it. Instead, we turned it into a catalyst for change. We committed to a clear reform agenda and a disciplined fiscal strategy built on three principles: stabilise debt, invest in infrastructure and spend better. Today, that commitment has delivered tangible results. For the first time in 17 years, debt will stabilise and it will continue to fall in the coming years. The budget deficit has narrowed significantly, and debt-service costs are also falling.
The world has taken notice:
- South Africa has been removed from the FATF grey list;
- We secured our first credit rating upgrade in 16 years;
- And borrowing costs have eased, creating space for growth and development.
These are signals of restored credibility. Of renewed resilience. And of a nation regaining its footing. The lesson is a simple but powerful one: steady structural reform and responsible public finances are the bedrock of a prosperous and more inclusive South Africa”.
Here are some key highlights from the Budget:
- No changes were announced to personal income tax, corporate income tax, or VAT rates
- Government’s medium-term fiscal strategy aims to stabilise the debt-to-GDP ratio in the current year and to reduce it through the rest of the decade by growing the main budget primary surplus.
- Over the next three years, principal and interest payments are expected to be R21 billion lower than estimated in the 2025 Medium Term Budget Policy Statement (MTBPS).
- Revenue collections for 2025/26 are projected to be R28.8 billion higher than the 2025 Budget estimate and non-interest expenditure is increased by R22.1 billion. Government will achieve a primary surplus of 0.9% of GDP.
- The consolidated budget deficit is expected to narrow from 4.5% of GDP in 2025/26 to 3.1% of GDP in 2028/29.
- To entrench the commitment to healthy public finances, government will introduce legislation requiring each new administration to table a medium-term fiscal plan to embed fiscal sustainability.
- VAT registration: The compulsory threshold increases from R1 million to R2.3 million (effective date 1 April 2026)
- Tax-free Savings: Annual contributions limit increased from R36,000 to R46,000
- Retirement Fund Contributions: The annual deduction cap increases from R350,000 to R430,000
- Capital Gains Tax (CGT): Annual exclusion increases from R40,000 to R50,000. The Primary Residence exclusion increases from R2 million to R3 million.
- Offshore Allowance: The single discretionary allowance (SDA) increases from R1 million to R2 million a year without tax clearance (effective date 1 March 2026)
It would be premature to say that South Africa has turned the proverbial ‘corner’. Many challenges lie ahead, and resting on our laurels simply isn’t an option. With wins at home (exiting the grey list, ratings upgrades, functioning government alliances), and ‘wins’ abroad (soaring precious metals prices, growing debt demand, a significantly stronger currency), however, our situation has seriously improved, and the future looks brighter than it has in many years.
Long may it continue.
