Budget 2026 in-depth: Details we expected to see — and what happened

Key topics:GDP growth improves; deficit and debt path stabilisingPrimary surplus achieved; fiscal discipline maintainedRelief from bracket creep; more infra, less waste.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.We expected the 2026 Budget to pivot away from dramatic tax hikes and focus heavily on administrative efficiency, infrastructure, and targeted growth. An expected R30bn revenue over-run was to be a welcome booster but how the GNU decided to allocate this was a key issue to watch. There was also a need to see that the 2023 pledge to rebuild public finances was continued.Compared with the past two years, Godongwana and his Treasury team entered this year’s Budgeting process last April and followed through to its ultimate conclusion today with wind in their sails. This included SA’s recent exit from the FATF grey list was a major win and the first sovereign credit rating upgrade in over a decade. Topping them all though was SARB Governor Lesetja Kganyago’s ability to finally get the inflation target dropped to 3% (from an effective 4.5%) which was a major factor in a 400 basis point decline in the state’s borrowing rates is a massive is an unappreciated victory for taxpayers. It will have a huge impact on future interest payments.An important test was whether the people controlling the national purse would be able to resist political pressure to spend on pet projects - and present a budget that prioritised long-term fixed investment over short-term consumption. It was on this criteria that the 2026 Budget would be judged. Taken from that perspective, Treasury earned 8/10 - an A if you’re using school parlance.Here’s our expectations - and what actually happened: The Growth Disconnect: We thought the Treasury would project GDP growth of around 1.2% for 2026. That’s a shocker - again - for a country that requires 4% growth to absorb new entrants into the job market. A key point for us was to see how Godongwana planned to bridge this yawning chasm that annually debts the hopes of millions of matriculants and varsity graduates.ACTUAL - Good news here is that the Treasury now estimates GDP grew 1.4% last year and is projecting an acceleration in the baseline figure to 2% in 2028. Our pessimistic (realistic?) expectation of 1.2% this year is, happily, way off the mark - Treasury projects GDP rising at 1.6% in 2026, its best showing in ages.While that’s still far from ideal, the economy is at last growing in line with the national population. So each citizen’s notional share of the economy (GDP per capita) will stop going backwards. And for context, GDP growth in 2024 was just 0.5%, so we’ve come a very long way in two years.The Debt Anchor: SA’s Debt-to-GDP ratio was already hovering dangerously close to 77% mark, with debt-servicing costs eating up more than 20 cents of every tax Rand collected. That has been the result of State overspending which took off in the Zuma Presidency. For all his charm and other attributes, Zuma was horribly ignorant on what is required to run a modern economy and, with hindsight, acted like a poor kid with a rich uncle’s credit card. It’s hard to think that pre-Zuma, the Debt-to-GDP ratio was just 26%, and interest taking just R8.80 from every R100 paid in tax. With the GNU now reliant on the support of private sector lenders, many from abroad, the bare minimum required in this Budget was a credible path toward continued primary budget surpluses (i.e. spending less than income - excluding interest payments) and a firm commitment to a fiscal anchor.ACTUAL - I’m no great fan of the hyper focus given to the ‘primary surplus’. In everyday language it’s like running a household budget that ignores the monthly mortgage repayments. Treasury argues, however, that interest is there to service productive borrowings (i.e. incurred in creating infrastructure, etc) so needs to be taken into account but not obsessed about. There’s no winning this argument as the Treasury is convinced primary surpluses must be celebrated and it did so again in this Budget. Giving credit where it’s due, this is the third successive year a primary surplus was achieved and Treasury projects the trend will continue and improve still further over the next three years. Given SA’s profligate record and primary budget deficits going back to 2008, as taxpayers we have to accept this as a big win. .On the debt front, the news can be interpreted in one of two ways. On the pure numbers, there’s more bad before the good starts coming through. The Treasury is optimistic about the future, but in the current fiscal year (to Feb 2027) SA’s Gross Debt-to-GDP is set to hit a fresh record of 78.9% - a full percentage point above where it had been anticipated just six months ago when the MTBPS was tabled. But here’s the real point. Treasury says it acted opportunistically and borrowed R38bn more than planned at better rates and longer maturities than anticipated. It officially describes the approach of a decision to take advantage of “positive market sentiment” - while the extra has pushed up the ratio, getting active in extending the maturity of the debt will have a massive impact in future. Director General Dr Duncan Pieterse puts the savings at tens of billions of rand. That will help reduce the borrowing requirement in future and relieve upward pressure on interest rates. At last, SA’s government is thinking about passing on a better future to those who will run the place in the years ahead. I asked what motivated this unusual action and the response was instructive and worth quoting in full: “The reality is financial markets and specifically funding conditions have not been constructive for between 10 and 16 years (aka Zuma’s reign). We’ve seen a 400 basis point compression in spreads…..now at 2011 lows. We’ve been able to tactically take advantage of the best conditions in 15 years through sizable pre-funding. If conditions improve, that means a continued decline in the cost of funding and supports our debt stabilisation efforts.”Something which sticks in the craw, however, is that despite SA’s progress on inflation and interest rates, this year a record R21,30 of every R100 in tax we pay will this year (and next) go to settle the interest on debt accumulated primarily through the profligate Zuma years. Reducing debt is a long game. But with the primary surplus forecast to keep growing - to 2.3% of GDP in FY2029 - Treasury forecasts continuously improving ratios as the graphic above shows. We trust all this discipline and sacrifice will be properly communicated to a restive citizenry. Otherwise it could simply be preparing another debt feast should Zuma’s party (and, worse, Malema’s lot) return to power in 2029. Treasury confirmed that the tax take for FY2026 was expected to come in at R1.98trn, a chunky R28.8bn higher than the R1.95trn forecast a year ago. In the fracas around the VAT increase last year, many of us had forgotten about the projected R20bn tax increase set to be announced in this Budget. The revenue overrun was employed productively, R22bn injected into rail infrastructure. Stealth Taxes, Again? After last year’s debacle, a VAT hike is now very definitely off the table. So the concerns around a reliance on bracket creep are very real. Vigilance, too, is required on hikes to the General Fuel Levy, the Road Accident Fund (RAF) levy and the usual barrage of sin taxes. ACTUAL - Whether it’s the public’s greater appreciation of bracket creep or just good governance matters not. After two years with no relief, personal income tax and medical tax credits are being fully adjusted for inflation this year. While just doing what’s right is never a headline grabber, when it comes to our pockets, this is actually the biggest story of Budget 2026. Together it’s a R15bn give-back to citizens - R13.7bn through addressing fiscal drag and R1.2bn in medical relief. Critically, in the Lockup Presser, Pieterse answered my question on whether fiscal drag will be embedded as future policy in the most positive way possible. Relief from the inflationary effect is always worked in by the Treasury, he said. So the decision NOT to do so is always based on hitting a bump where money was needed from somewhere to balance the books. .As the image above shows, personal taxpayers have been carrying an increasing burden of funding the bloated South African public sector. The State’s share of the economy continued growing in FY26 hitting 25.9% of GDP, up from 25.1% the year before. By leaving bracket creep unattended for two years, the government enabled the share by PAYE and provisional taxpayers to hit a record 40% of total South African income tax - one of the highest burdens in the world. In 2007 the slice of the pie share paid by individuals was a full one third lower. This overweighted reliance on personal income tax is unsustainable and a problem the Treasury appreciates. The true vulnerability is even worse. The Budget Review points out nearly half of all personal income tax is paid by those who earn R1m a year or more - just 7.7% of registered taxpayers. One level down, the top 13%, pay a staggering 60% of personal income tax. The table below reflects how dependent the nation is on its highest earners. .Another positive in the overall picture is the per litre general fuel levy rose just 2.2% from R4.01 to R4.10 for petrol; and by 2% from R3.85 to R3.93 for diesel. That’s below the new low inflation target and super positive. The per litre Road Accident Fund levy was raised in line with inflation (3.2%) from R2.18 to R2.25. So-called sin taxes were raised once again, with a can of beer costing 8c more and a bottle of wine rising 16c. Again, palatable given they are in line with underlying cost of living increases. Infrastructure over Consumption: We expected there to be a very definite shift in the focus from bailing out State-Owned Enterprises (SOEs) to improving crumbling infrastructure by aggressive private sector participation through expanded Public Private Partnerships (PPPs). Apart from announcements on that side a further key signal is the much-anticipated R15 billion infrastructure bond issuance.ACTUAL - Treasury confirmed that the government raised R11.8bn last year through its first infrastructure and development finance bond with strong demand reflected in what it describes as a “favourable” interest rate. Critically, these funds will be ring-fenced - only used for infrastructure projects that have been through “a rigorous assessment” by Treasury itself. The intention is to raise more money in this way in future, including specially packaged Sukkuk bonds to tap into Middle Eastern wealth funds.As noted earlier, of the R28.8bn revenue over-run, R22bn is being invested into Transnet and Passenger Rail Services - justified as an investment into the future. The Wage Bill Restraint: Next to stealth taxes, this is the other elephant in the room that’s often missed. Much attention is required on the public sector wage bill - an ever growing cancer that counts against the efficacy of our taxes in promoting economic growth (the key determinant of a virtuous cycle that gets a nation on the path to prosperity). Ahead of the Budget there was talk of early retirement programmes targeting the SANDF and broader payroll reforms to trim the fat.ACTUAL - Sure, we have heard it before (remember Tito’s R25bn budgeted cut that never happened?) but the government's latest Early Retirement Programme appears more measured. The Budget Review tells us since the programme began in October last year 7 687 applications have been approved delivering a net saving of R5.5bn in the next three years. Of course, it only works if those leaving are not replaced by new faces……On a similar tack, an investigation into “ghost” workers has identified 4 323 “high risk cases”.WHAT (PLEASANTLY) SURPRISED US Fixing Local Government - Treasury refers to a fundamental shift in the approach and admits that the numbers have been fudged to mislead citizens or as they put it “for over a decade, intergovernmental flows have masked financial weaknesses in subnational governments.’ Yarwellnofine”. The key message from Pretoria - government is moving from oversight of Metros and municipalities to “active structural intervention.’ Extending the remit of the increasingly productive Operation Vulindlela to include municipalities is another reflection of the serious intent. * Targeted and responsible savings (TARS) - Very early days but there are signs of TARS delivering benefits. This initiative is like the government’s equivalent of a large corporation focusing on a large strategic project aimed at cutting fat out of the system. They have mixed results, but there’s at least one example of progress - R12bn identified as ‘wasteful or ineffective’ in the shifting of the public sector network grant to passenger rail services. Adjusting of small business tax thresholds Some welcoming housekeeping on long-ignored tax thresholds for small businesses and other arcane aspects. Tax advisors will be delighted to see some pretty hefty adjustments which ensures they’ll be able to pass on some good news to clients. Comprehensive reviews below.

Budget 2026 in-depth: Details we expected to see — and what happened

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