South Africa’s National Budget Speech 2026

The Minister of Finance, Mr Enoch Godongwana, presented the National Budget Speech before Parliament on Wednesday 25 February 2026, against a fiscal landscape that remains strained even though markets and inflation appear to have steadied.

The International Monetary Fund (IMF) in its 2026 Article IV Consultation Report on the South African economy dated 9 February 2026 notes that:

• "South Africa has faced repeated shocks in recent years, including due to higher global policy uncertainty in 2025. The economy has proven resilient thus far, owing to its ample natural endowments, independent institutions, and strong monetary policy framework.
• Economic activity is expected to improve gradually over the medium term, while inflation is projected to converge to the new 3-percent target. Risks remain tilted to the downside, related to continued trade and global policy uncertainty and domestic reform fatigue.
• Long-standing structural impediments and rising debt continue to constrain resilience and potential growth, highlighting the importance of strong policies and reforms to support macroeconomic stability, employment, and growth."

The government's response to the Article IV Consultation Report noted the following:

"South Africa's removal from the Financial Action Task Force (FATF) Grey List in October 2025 and a S&P Global credit rating upgrade (BB- to BB) in November 2025 mark significant gains for the country, for business confidence and for investment. The FATF decision was the fruit of extensive collaboration between government departments and the financial sector to strengthen the country's anti-money laundering regime. The sovereign risk premium, and consequently the outlook for borrowing costs, has improved significantly during 2025".

The Budget Review notes that the outlook for economic growth is improving as reforms gather pace. Over the next three years real GDP growth is expected to average 1.8% and inflation expectations are shifting lower in line with the 3% target. Public-sector infrastructure initiatives are stated to have begun to attract significant private investment. The Budget Review states that the 2026 Budget signals a major shift in the effort to fix local government.

Tax rates remain unchanged with relief for natural persons

The corporate income tax rate remains unchanged at 27%. Some relief has been granted to compensate natural persons for the effect of bracket creep. The proposed rates result in slightly reduced tax burdens across all income bands, depending on the income level and the age of the taxpayer. Medical tax credits will be fully adjusted for inflation in the current year after two years without inflationary relief. The VAT rate remains unchanged at 15%. The income tax rate for trusts remains unchanged at 45%.

Threshold and limit adjustments

The threshold and limit adjustments noted in the Budget Review are stated to promote entrepreneurship, savings, and a fairer tax regime after many years without any inflationary updates. The following are the key adjustments:

Customs and Excise Duty and levies

Amendments to excise duties are proposed with effect from 25 February 2026. These include a 3.4% increase to duties on alcoholic beverages (beer, wine, spirits, cider and fermented beverages), as well as tobacco products including cigarettes, cigars, pipe tobacco and electronic heated tobacco products. The general fuel levy will increase to R4.10/litre for petrol and R3.93/litre for diesel from 1 April 2026. The carbon fuel levy will increase to 19c/litre for petrol and 23c/litre for diesel.

Exchange control

Amendments to the Exchange Control Regulations are proposed with the aim to include crypto assets in the capital flows management framework to complement the recent regulation by the FSCA, which has declared crypto assets to be "financial products."

Debt stabilisation

Government is working to ensure a steady decline in debt as a percentage of GDP for the rest of the decade, reducing the cost of servicing debt and creating a more supportive environment for private investment.

Tax revenues and government spending

The gross tax revenue estimate for 2025/26 is revised up by R21.3 billion from the 2025 Budget estimate, despite lower-than-expected nominal GDP. The tax-to-GDP ratio is expected to increase from 25.1% in 2024/25 to 25.9% in 2025/26.

The Budget Review notes that the top 13% of individual taxpayers pay over 60% of personal income tax, and nearly half of personal income tax is paid by the 7.7% of taxpayers with taxable income above R1 million per year.

Government's 2026 medium-term expenditure plans reflect its priorities of supporting infrastructure development, protecting social services and improving the quality of basic services. Consolidated government spending is projected to grow by 3.9% a year over the medium term.

Conclusion

The Budget Review notes that consistent fiscal discipline, along with government's decision to reduce the inflation target, has improved investor perceptions and narrowed the risk premium investors attach to South Africa. The combined benefits are expected to result in a decline in government's borrowing costs and a more favourable environment for private investment. While the budget remains highly redistributive, with 60% of expenditure going to the social wage bill - government is stated to be working to make that spending more efficient and effective.

Main tax proposals

The main budget proposals for the 2026/2027 fiscal year are as follows:

• Personal income tax bracket, rebates and medical tax credits adjusted to compensate individuals for the effect of bracket creep.
• Increase of VAT compulsory registration threshold to R2.3 million.
• Increase in Tax Free Saving Contributions limit to R46 000 per annum.
• Increase of 3.4% in excise duties on alcoholic beverages and tobacco products.
• Increase in the general Fuel Levy on petrol by 9 cents per litre, and on diesel by 8 cents per litre.
• Increase in the Road Accident Fund Levy on both petrol and diesel by 7 cents per litre.
• Increase in the Carbon Tax on fuel by 5 cents per litre for petrol, and by 6 cents per litre for diesel.
• Further consultation on a national online gambling tax during 2026.