Finance minister Enoch Godongwana’s 2026 budget, delivered on Wednesday without the drama that marked last year’s effort, is another milestone in South Africa’s economic recovery after years of soaring public debt, profligate bailouts to state-owned companies and a general sense of malaise.
The foundation has been laid; now comes the important task of building the house.
Growth — and plenty of it — is the key. The budget estimates real GDP growth of 1.6% in 2026, up from 1.5% in 2025 and rising to 2% by 2028. These are modest figures, barely sufficient to meet the challenges of poverty and unemployment. But they are a start.
According to National Treasury director-general Duncan Pieterse, “a new era of fiscal sustainability will create the basis for higher economic growth”. However, this must be combined with reforms to support faster expansion and faster job creation.
Limited reforms in the energy and rail sectors, alongside a greater role for private capital, have improved performance. Yet we remain a long way from unleashing state-owned companies to become the engines of growth they should be.
Politically, with President Cyril Ramaphosa approaching the end of his second term, it is unclear whether his successor will retain his market-friendly outlook — or whether the country will revert to populist economic notions that may win votes but will hobble the economy.
Godongwana’s budget has highlighted our success in attaining important milestones, not the least of which is the need for frugality amid global uncertainty
The budget will, however, bring relief to constrained consumers. Plans to raise taxes by R20bn have been shelved, thanks to higher revenue generated partly by a commodity bull market. The adjustment of tax brackets will also help households.
With local government elections looming, the state of municipalities was an important theme. Godongwana noted that 63% are in financial distress, with weak revenue collection a major obstacle to progress.
That is why the Treasury’s performance-linked reform programme for electricity and water services — with a R27.7bn allocation — could be a game changer, arresting the diversion of funds from critical projects to current spending.
Small businesses also got a shot in the arm through the increase in the VAT registration threshold from R1m to R2.3m. But a lot more red tape needs to be cut if SMEs are to fulfil their potential as engines of growth and job creation.
The proposed increase in infrastructure investment demonstrates a recognition of its being central to growth. A 10% increase in infrastructure spending compared with a 3.9% rise in consolidated expenditure underlines a new emphasis on investing for the future.
An additional R12bn for early childhood development is also a welcome boost, and a reminder that investing in people must remain a priority.
South Africa’s removal from the Financial Action Task Force grey list, an improving credit rating and a stronger rand suggest the country may be emerging from a prolonged period of stagnation.
But there is no time to rest on our laurels. Last year’s ham-fisted attempt to foist a 2.5 percentage point VAT increase on a long-suffering public may be a thing of the past, especially as coalition government begins to show itself to be a solid foundation on which to build for the future.
Godongwana’s budget has highlighted our success in attaining important milestones, not the least of which is the need for frugality amid global uncertainty. The next steps will show whether we are entering a more prosperous era or — should we falter now and lose our nerve — merely enjoying a false dawn.
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