By Leah Falcon
Every year the South African (SA) government announces their promises to the public in the form of the State of the Nation Address (SONA). Lofty political promises are given distinct fiscal limitations a couple of weeks later with the Budget announcement.
This year, President Cyril Ramaphosa delivered the SONA on 12 February. He expounded the government’s points of focus being:
- Water and sanitation infrastructure (committed a significant portion of public funds to upgrade deteriorating infrastructure)
- Crime (particularly in the wake of the Madlanga Commission, the SA National Defence Force would be deployed in the Cape Flats and areas of Gauteng to address gang violence and illegal mining, among other imbedded issues)
- Professionalising State Owned Entities (SOEs) (particularly projects by the State Property Company, management of national ports, rail lines and energy)
- Private partnerships in energy and logistics (by streamlining rail projects and providing tax incentives for electric vehicles)
- Business (by easing licensing regulations)
Finance Minister, Enoch Godongwana, followed this up on 25 February with the Budget speech, declaring a total 2026/2027 spending of R2,67 trillion.
A Review on the 2026 National Budget published by the National Treasury on 25 February 2026. Finance Minister of South Africa, Enoch Godongwana, made the 2026 National Budget speech in Parliament 25 February 2026. Sourced from the National Treasury Government website.
The 2026 Budget foregrounded recent successes in the national economy, SA’s standing in the global economy, and the need for continued fiscal consolidation to improve SA’s credit ratings. SA was downgraded by the major credit-rating agencies between 2017 and 2020 to “junk status” in response to State Capture, poor economic growth and rising national debt.
Since then, SA has managed, for the first time in 17 years, to stabilise its debt, and achieved its first credit rating upgrade in 2025 and was removed from the Financial Action Task Force’s (an intergovernmental financial watchdog agency) grey list. Godongwana framed this year’s budget as “steady structural reform and responsible public finances” focused on accelerated public investment and efficient public spending in order to continue this growth.
Where the money is going
Identified as the “primary focus”, R848,2 billion has been pledged to address crime. Significant investment will be made into water infrastructure (R185,2 billion over three years), health (R24,3 billion over three years) and port and rail (R11,2 billion to capital projects) in attempts to revitalise and modernise.
A Review on the 2026 National Budget published by the National Treasury on 25 February 2026. Finance Minister of South Africa, Enoch Godongwana, made the 2026 National Budget speech in Parliament 25 February 2026. Godongwana declared a total 2026/2027 spending of R2,67 trillion during the speech. Sourced from the National Treasury Government website.
The good news
Most significantly, the Budget has lowered the inflation target to 3%. This is aimed at allowing the government to borrow money at a cheaper rate and facilitating government spending in the projects identified by the Budget and SONA.
The tax received in the last fiscal year exceeded expectations, which has meant that the government has withdrawn the R20 billion tax increase which had been suggested in the 2025 Budget.
To incentivise saving and investment among South Africans, the tax-free annual investment limit will be increased from R36,000 to R46,000. This allows a person to deposit more in such a savings account without having to pay tax on the interest earned therein.
The retirement fund deduction limit has been raised for the first time after a decade from R350,000 to R430,000 per year. This allows individuals to withdraw the stated amount from the contributions they have made to all retirement funds.
Tax budgets have also been adjusted to align with inflation (3,4%), meaning that individuals will not move out of their tax bracket just because their salaries have risen with inflation.
Small businesses are getting a reprieve as the VAT (value-added tax) registration threshold has been increased from R1 million to R2,3 million. This means that small businesses who make less than R2,3 million in their yearly taxable turnover are not compelled to register for VAT. Continuing the attempt to promote trade and investment, certain restrictions on cross-border flow of capital will be eased.
The bad news
Tax inevitably has to be raised on certain things to keep a source of the government’s income in line with inflation. Tobacco, alcohol and fuel will bear the brunt of this.
Excise duties (an indirect tax placed on local goods which is generally used to discourage consumption of the product) on tobacco and alcohol are increasing. A 20-pack of cigarettes is rising from R22,81 to R23,58 (a 3% increase), a 750ml bottle of wine will go up by 15 cents and a 340ml beer or cider will increase by eight cents.
R310.4 billion of total government expenditure will go to health while peace and security receives R274.6 billion. Sourced from the National Government Treasury website.
The general fuel levy (tax paid to the government on the purchase of fuel) is increasing by nine cents and eight cents per litre for petrol and diesel respectively. Similarly, the carbon fuel levy and Road Accident Fund levy (an additional tax which contributes to the fund available to claimants in the case of accidents on South African roads) are increasing.
The market response to the budget has been largely stable, showing support (or at least acceptance) by the global economy.
This is a very important and remarkably well expressed summary of South Africa’s recent 2026 National Budget. I complement the author and the Editor. Such matters are often quite complex – this article has simplifies and synthesised the most relevant parts. Well done!