Finance Minister Enoch Godongwana's Budget 2026 speech provides welcome relief for South Africans facing rising living costs. While excise duty, fuel duty and road accident funding saw modest adjustments, key positives included the cancellation of R20bn in proposed tax rises – included in the May 2025 budget – thanks to stronger-than-expected revenue collections.
In addition, new tax-relief measures have also been announced – designed to ease domestic pressures and support economic growth amid ongoing fiscal challenges. with this in mind:
– Individual income tax brackets and exemptions were fully adjusted to reflect inflation, helping taxpayers keep more of their income in real terms.
– The annual tax-free investment limit (for tax-free savings accounts) was increased from R36,000 to R46,000 per year.
– The superannuation-fund deduction limit was increased from R350,000 to R430,000 per year, allowing individuals to contribute more each year on a tax-free basis, and
– The mandatory VAT registration threshold was increased from R1m to R2.3m, reducing the compliance burden on small businesses.
In addition, the capital gains tax exemption for small business sales by older persons was increased from R1.8m to R2.7m (applying to businesses worth up to R15 million).
Andrew Golding, chief executive of Pam Golding Property Group, says, “These measures acknowledge the continued and increasing cost challenges facing South Africans, particularly rising municipal rates and tariffs for essential services such as water and electricity.”
“For the residential property market, any improvement in household cash flow is important. Increased disposable income enhances affordability, supporting buyer confidence and strengthening the ability of first-time buyers to enter the market. In an environment where interest rate stability and competitive lending conditions are already underpinning activity, these measures provide an additional tailwind.”
“Finance Minister Enoch Godongwana has demonstrated a reliable hand in playing the economic cards well to better address the inevitable competing demands on South Africa's still limited public finances,” says Raymond Parsons, economist at NWU Business School.
“Although global factors still pose risks, South Africa's terms of trade have improved as a result of the commodity price bounce. The budget strategy now provides a more stable macro-backdrop, with further interest rate cuts likely this year, and sovereign credit rating upgrades possible over the next few years. Budget relief on 'bracket creep' and medical-aid credit should also boost business and consumer confidence.”
“The key benefit of building confidence in fiscal sustainability through a budget commitment to higher inclusive growth is not only that it strengthens resilience, but also makes other goals – such as job creation and a larger tax base – easier to achieve.”
fiscal outlook positive
Speaking at the gathering, Standard Bank Group Head: South Africa Macroeconomic Research Elna Moolman said Godongwana's announcements were in line with Standard Bank's long-standing expectation.
“The Treasury remains committed to its fiscal consolidation targets of reaching a peak in the debt-to-GDP ratio this financial year (FY25/26).
“This has been achieved with very conservative revenue assumptions, in which we see significant upside risk – in other words, fiscal outcomes could be better than forecast in this budget,” Moolman said.
“Achieving planned fiscal consolidation is positive for the bond market and SA's sovereign credit rating,” he said. But this budget does not justify further bond gains, he warned: “Having already been skeptical, SA government bonds are already discounting this fiscal recovery in recent months.”
“In addition, this budget also does not change our expectations for SA’s sovereign credit rating,” he said. “We see a high likelihood of another upgrade by S&P this year, but imminent positive rating action by Moody's and Fitch cannot be taken lightly.”
Growth requires confidence
“Post-Budget, a litmus test will be whether a sufficient number of companies now feel that the policy environment and growth prospects justify their making new plans for expansion,” Parsons said. “VAT assistance to SMMEs is welcome. President Cyril Ramaphosa’s next investment conference in March should be another forum to help do this.
“Once again, the challenge remains to ensure that growth-friendly policy and project commitments are translated into reality in a way that strengthens long-term investor confidence, as well as making a tangible difference to effective delivery.”
Shannon Freedman, CEO of VAT Modernization SA, says: “Overall, National Treasury's 2026 Budget strikes an appropriate balance, with a strong emphasis on a fiscal strategy that promotes inclusive growth, macroeconomic stability and the long-term sustainability of public finances. Equally importantly, it also delivers meaningful tax relief to consumers.”
Friedman says these tax relief measures were largely made possible by the R21bn of additional tax revenue collected last year. “This increase in revenues can be largely attributed to SARS' modernization efforts to make tax collection more efficient and robust. But this is just the beginning.”
“Over the next five years, the revenue collector will implement its Modernization 3.0 project to address tax leakages estimated at R800bn per annum. A key part of this project will be the modernization of VAT reporting and collection processes, which will further strengthen the fiscus and allow South Africans to reap the benefits of a growth economy.”
Parsons agrees: So South Africa needs to break free from the shackles of a low-growth economy now. “The current economic recovery is still modest and uneven. The economy is not yet on autopilot and disappointed expectations may yet be easily self-fulfilling.
“If it is to surprise the budget's modest near-term average growth projection of 1.8% and ultimately meet the GNU's GDP growth target of 3.5% by 2030, very high levels of fixed capital formation are required.”
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