Budget Speech 2026 | A Fiscal Turning Point in a Resilient Economy
The annual budget speech is now being delivered, and the transcript of his speech per the first attachment.
You can now read the speech as he presents it.
Before the time, What Markets wanted to see:
The overall market expectation before the time was to see:
Continued strong emphasis on fiscal consolidation, i.e. Tight expenditure control (esp. public sector wage bill, social (& Covid) grants & SOEs).
The Finance Minister will be able to point to lower bond yields and ratings upgrades as evidence that the market is recognising reform (including Operation Vulindlela), and that the government must maintain momentum. This will echo the emphasis in the SONA. Ultimately, SA cannot rely on commodity windfalls. It must build a competitive economy and a business-friendly environment.
Improving economic growth profile – 1.5% to 2% medium term growth is high by SA’s recent standards, but not compared to other emerging markets. Investment must be unlocked to sustain higher growth, however, and the Budget will again emphasise public infrastructure spending and on crowding in private investment.
Conservative provision for tax revenue overrun – the precious metals boom is likely to lead to a tax overrun in FY26 and FY27, with estimates varying between R15bn and R80bn. However, given the cyclical nature of commodity prices, the Treasury will likely be cautious in how this is incorporated into the medium term projections. Nonetheless, it means that any planned tax increases will be postponed. The tax revenue overrun will likely be mostly allocated to debt reduction, but some of it will be put to increased funding to front-line services in line with last year’s positioning.
Somewhat smaller budget deficit compared to MTBPS projections, with a growing primary surplus (ex interest payments). This should lead to debt stabilisation in line with MTBPS projections.
No large SOE support
Covid grant already extended to the end of March 2027
Continued emphasis on reducing govt debt/GDP ratio
No populist policies or spending measures
No BIG (Basic Income Grant) in its original envisaged form
No tax increases (apart from fuel levy, sin taxes)
To foster the growth the country needs, more detail and confirmation around promised Infrastructure spending
For myself, I was also curious to see:
Any commentary on the tax collections for the first full year around the 2-Pot retirement system introduced?
Confirmation from Treasury on their comments a month ago (and that received exceptionally little press coverage), that no material funding for at least the next 5 years can be offered to the proposed NHI.
Treasury Growth Estimates
In the Budget Speech now, South Africa’s economy is expected to grow by 1,6 per cent in 2026, up from 1,4 per cent in 2025. Real GDP growth is forecast to reach 2 per cent by 2028, supported by continued momentum on structural reforms, improving confidence, lower interest rates and higher investment
Government debt will stabilise, at 76,2 per cent of GDP in 2025/26, while the consolidated budget deficit also narrows, to 3,5 per cent by 2027/28.
Public Infrastructure Spending
Public infrastructure spending over the next three years will amount to more than R1 trillion.
The spending will focus on three sectors:
• R577.4 billion will be spent by state-owned companies and other public entities;
• R217.8 billion by provinces; and
• R205.7 billion by municipalities.
By sector, transport and logistics make up the largest share.
Transport
In transport, SANRAL will focus on strengthening long-term network resilience. This includes the annual maintenance of approximately 27,000 kilometres and the resurfacing of 2,000 kilometres of road.
The Passenger Rail Agency of South Africa (PRASA) will continue implementing its corridors recovery programme and modernising core infrastructure to rebuild a reliable, affordable rail service for commuters.
This will enable the increase in annual passenger trips from 77 million in 2024/25 to between 250 and 450 million over the medium term.
VAT Increase
There are no changes to VAT.
Tax Proposals
Personal Tax brackets see soft inflationary increases, especially in the lower tax bands.
TFSA’s increased to R46 000 per annum
Contributions to TFSA have been increased to R46 000 per person per annum.
There were no changes to the Interest exemptions.
Single discretionary allowance limit for private individuals
Increased from R1 million to R2 million per calendar year.
Primary Residence Capital Gains Exclusion
Increased from R2 million to R3 million per calendar year.
Annual capital gains exclusion
Increased from R40,000 to R50,000 for individuals and special trusts;
More tax thresholds and limits reviewed, some last updated in 2002
Not Introduced
No specific wealth taxes per say
Sin Taxes
Sin taxes increase as expected:
• The tax on a 20-pack of cigarettes rises from R22.81 to R23.58.
• Pipe tobacco rises by 28 cents per 25 grams, and cigarette tobacco by 87 cents per 50 grams.
• Cigars rise by R4.56 per 23 grams.
The excise on alcoholic beverages also rises with inflation.
• A 340 millilitre can of beer or cider increases by 8 cents.
• A 750 millilitre bottle of wine goes up by 15 cents.
• A 750 millilitre bottle of spirits will increase by R3.20.
Fuel Levies
In terms of fuel levies, the total increase will also be in line with inflation.
• The general fuel levy will go up by 9 cents per litre for petrol and 8 cents per litre for diesel.
• The carbon fuel levy will go up by 5 cents per litre for petrol and 6 cents for diesel.
• The Road Accident Fund levy will increase by 7 cents per litre.
Planner Thoughts on the Budget
My own initial thoughts on the budget :
“Tax collections came through much higher.
Beforehand, what was needed from this budget speech was strong fiscal discipline to balance the budget, and have specific implementation measures to reduce the Government Debt levels, which at first glance seems to have been achieved.
Government debt will stabilise, at 76,2 per cent of GDP in 2025/26, while the consolidated budget deficit also narrows, to 3,5 per cent by 2027/28.
Markets will like this Budget”.
I’ll share the further details with you on Friday.
