Lizl Budhram, Head of Advice at Old Mutual Personal Finance
The consensus in the run-up to the 2026 National Budget is that a combination of economic growth, low inflation, and resurgent gold and platinum group metal (PGM) prices will give the Minister of Finance room for a taxpayer-friendly budget with few surprises.
There are also encouraging signs that the country will not have to endure a repeat of the uncertainty that accompanied the 2025 National Budget. Last year, Minister Enoch Godongwana was unable to deliver the Budget Speech on schedule due to some Government of National Unity (GNU) partners’ unhappiness with a proposed VAT increase, which was subsequently scrapped. This year, the partnership appears more aligned.
So, what should taxpayers look out for when Finance Minister Enoch Godongwana takes to the podium on 25 February 2026? In the first weeks of February, most commentators were suggesting that the Budget would be focused on debt stabilisation and structural reforms to address the country’s dual challenges of low economic growth and unemployment. Unemployment remains in the spotlight despite small improvements in the latest numbers published by Statistics SA.
President Cyril Ramaphosa offered some insights into what the Budget might contain in his State of the Nation Address (SONA 2026). He shared positive macro factors such as four consecutive quarters of GDP growth and two consecutive primary budget surpluses alongside upbeat comments on inflation and the rand’s strength against the dollar.
Favourable external conditions such as resurgent commodity prices and a weaker US dollar, mask underlying vulnerabilities. For example, South Africa remains exposed to renewed US tariff pressures and a gradual reduction in Western funding support, both of which could tighten fiscal space and dampen export momentum.
Analysts have been urging the government to maintain the recent primary budget surplus trajectory, warning there is little room for expansionary policies. But SONA 2026 hinted at a range of initiatives that could add millions to the expenditure side of the national accounts.
The Minister of Finance will have to find funds for Ramaphosa’s promises, which include combating crime by deploying the SANDF to parts of Gauteng and the Western Cape and employing more policing resources; the debt servicing costs relating to around R940 billion in infrastructure spending over the coming three years; and vaccinating the national cattle herd against the current foot-and-mouth outbreak.
It is unclear to what extent government spending will be influenced by 2026 being a local election year, though there are plenty of potential red flags. One is that billions of rand are needed to help the millions of South Africans affected by critical water shortages. Another centres on plans to redesign the post-Covid Social Relief of Distress (SRD) grant to go beyond temporary relief, likely at a much higher cost to the fiscus.
Investors can find reason for cheer thanks to medium-term forecasts for real GDP growth trending between 1.2% and 2% and government debt-to-GDP pegged below 80%. The consensus is that the bond market is expected to have another good year, as are equities, though the latter asset class is unlikely to deliver a repeat of the near 40% total returns in 2025.
Household budgets could improve in the coming 12 months as the South African Reserve Bank (SARB) contemplates further interest rate cuts. Analysts are signalling between two and three 25 basis point cuts through 2026. This, combined with real growth in household income, should support the consumption side of the economy.
Election-year pressures and improved revenue collections should push unpopular tax decisions, such as a hike in VAT, further down the road. Thus constrained, National Treasury is expected to rely on broadening the tax base and possibly again the so-called bracket creep to swell its coffers this year. Bracket creep is a stealth tax that hits South African taxpayers when personal income tax brackets and rebates stay frozen while salaries rise nominally to keep pace with inflation.
The Minister can quietly boost income tax revenues by leaving these bands unchanged, as he has done in 2024 and 2025. In the lead-up to this year’s Budget, analysts expect Minister Godongwana to continue this approach for a third consecutive year.
The commodities windfall has eased immediate pressure to find the R20 billion in additional revenue signalled last year, but Treasury still has limited room to manoeuvre. Since a VAT hike remains politically off the table, attention may turn to incremental measures such as above-inflation increases in fuel levies, excise duties, or sin taxes. These adjustments filter through to household transport and consumption costs.
Consequently, there are a number of risks that financial advisers should raise when advising customers on investing and tax strategies. For example, they should flag with customers the heightened SARS enforcement that goes hand in hand with higher revenue collection targets. SARS has warned that it will be tough on taxpayers with undeclared offshore holdings, including crypto assets.
Advisers should also check in with mid-income customers who may be facing affordability challenges despite inflation trending towards 3%. On the investment side, advisers will have to align asset allocations with broader geopolitical concerns. Deciding on customers onshore-offshore exposures and asset class allocations in different geographies has never been more critical.
The 2026 Budget is likely to project stability, underpinned by fiscal discipline and improved revenues. But beneath the calm surface, pressures remain. Subtle tax creep, constrained public finances, and global uncertainty mean advisers will need to work even harder to structure robust, fit-for-purpose financial plans for their customers.
ENDS
