Markets likely to welcome disciplined, growth-focused Budget, by Izak Odendaal, Investment Strategist, Old Mutual

The Budget should be well received by markets, particularly given its clear emphasis on economic growth and continued fiscal consolidation. Importantly, there was no pre-election populism, government has stuck to the path of debt stabilisation and improving South Africa’s growth profile over the medium term.

That said, much of the positive news was likely already priced into the bond and currency markets. To deliver a true upside surprise, National Treasury could have used more of the R28 billion tax windfall to accelerate debt repayment. Instead, it chose to increase spending by R22 billion, effectively following through on what it had intended last year when the proposed VAT increase was tabled.

Overall, however, investors should be satisfied. The debt trajectory remains on a stabilising path, and the growth outlook is gradually improving, despite ongoing domestic and global risks. Ratings upgrades are unlikely to follow immediately but remain possible over the next 12 to 18 months as more concrete evidence of fiscal discipline and reform momentum emerges.

From a taxpayer perspective, this Budget is certainly more reassuring than last year’s. The withdrawal of the proposed R20 billion tax increase, thanks to stronger-than-expected revenue, means no additional tax hikes. Bracket creep relief, for the first time in two years, alongside increases in medical aid tax credits, provides welcome support to households.

Budget highlights

• Proposed R20 billion tax increase withdrawn due to revenue overrun – no new tax hikes.
• Bracket creep relief for the first time in two years and an increase in medical aid credits – positive for personal taxpayers.
• Sin tax increases broadly in line with inflation; fuel levy up by 9c/l and RAF levy by 7c/l – both increases are below the rate of inflation.
• Tax-free savings account limit increased to R46 000 and retirement annuity RA deduction limit raised to R430 000, positive for savers and retail investors.
• Single offshore allowance lifted to R2 million per year, while the threshold for small businesses having to register for VAT was lifted to R2.3 million.
• No formal fiscal anchor yet, but legislation to entrench fiscal sustainability is being prepared, an important step to protect policy credibility and hard-won gains.

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‘Kudos Minister for a pro-consumer budget’, says John Manyike, Head of Education, Old Mutual

At a time when households remain financially stretched, the Minister struck a careful balance between maintaining fiscal discipline and providing targeted relief. The decision to withdraw the proposed R20 billion tax increase, introduce bracket creep relief in two years, and increase medical aid tax credits all provide direct support to consumers’ disposable income.

Importantly, this is not just a relief-focused Budget, it is also a growth-supportive one. The strong focus on infrastructure investment of over R1 trillion demonstrates a clear commitment to boosting South Africa’s long-term economic capacity. This investment has the potential to create much-needed jobs, and if implemented at the scale envisioned by the National Development Plan, this could help achieve the targeted economic growth outlined in that blueprint.

At the same time, the increases in the tax-free savings account annual limit to R46 000 and the retirement annuity deduction cap to R430 000 significantly strengthen savings incentives. The key benefit to the consumer with these is that growth on these investments is completely tax-free. This relief can help people build financial freedom.

We are pleased with the proposal to introduce reforms to manage unclaimed benefits through the creation of a central administrator responsible for record-keeping and tracing is a positive and necessary intervention. Checks and balances are critically important, particularly when dealing with an estimated R88 billion in unclaimed benefits.

While there are many encouraging elements in this Budget, one area where an opportunity may have been missed is in addressing the growing gambling crisis in the country. Consideration could have been given to introducing a targeted or special gambling tax, with proceeds directed towards awareness, prevention and rehabilitation programmes. As gambling participation increases, so too does the social and financial strain on vulnerable households. A more deliberate fiscal intervention could have formed part of a broader strategy to mitigate these risks.

Consumers should therefore not view this Budget passively. While sin taxes have increased broadly in line with inflation and the fuel levy has risen by 9 cents per litre (with the RAF levy up by 7 cents), these adjustments will still have an impact on monthly household budgets. Now is the right time for individuals to review their personal finances, reassess spending patterns, and adjust for these incremental cost pressures.

Equally, consumers should actively consider how to take advantage of the enhanced savings incentives, such as increasing contributions to tax-free investments or retirement annuities, where affordable, to improve long-term financial outcomes.

In short, this Budget supports consumers in two important ways: it offers near-term relief while laying the groundwork for stronger growth through infrastructure investment and fiscal stability. The opportunity now lies with consumers to respond proactively by reviewing their budgets, planning strategically, and making full use of the incentives provided.

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Old Mutual welcomes the increased tax-free investment limits and RA tax deduction exemptions, by Lizl Budhram, Head of Financial Advice at Old Mutual Personal Finance

Old Mutual Personal Finance welcomes the Minister of Finance’s announcement in today’s budget that the tax-free annual investment limit has been increased from R36 000 to R46 000, and that the retirement fund deduction cap has been raised from R350 000 to R430 000. This gives South Africans greater room to save more each year on a tax-free basis.

We have been calling for exactly this kind of step so that these vehicles can play a more meaningful role in long-term savings and retirement planning. The previous limits constrained the opportunity for tax-efficient growth over time, particularly for those who are serious about building sustainable retirement outcomes.

While there is no increase to the R500 000 lifetime limit yet, diligent savers still have approximately three more years before this cap becomes a constraint. We, however, hope to see an adjustment to the lifetime limit before that point to encourage continued long-term growth further.

It is also great to see an inflationary adjustment to income tax brackets after two years of bracket creep, a move that taxpayers will welcome, as it provides relief and strengthens disposable income.

We believe the next clear step for financial advisers is to talk to their clients now. Alert them to these changes and help them capitalise on the increased limits sooner rather than later, so they can maximise tax-efficient savings and strengthen their long-term financial plans.

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VAT threshold increase gives SMEs breathing room and will strengthen economic recovery, says Edith Jiya, Managing Director, Old Mutual Retail Mass Market

We welcome and commend the Minister for taking bold steps to encourage the growth of small businesses, particularly through the announcement of the increase in the compulsory VAT registration threshold from R1 million to R2.3 million.

This measure provides meaningful relief to small and medium-sized enterprises, easing compliance pressures and freeing up capacity for growth and reinvestment. It aligns well with broader efforts to improve fixed investment, accelerate structural reforms, and attract greater investment into water, logistics, and other critical infrastructure.

Importantly, this is exactly what consumers need. A supportive environment for SMEs strengthens the broader economic ecosystem, helping businesses expand, hire, and innovate. Given that much of the recent economic resilience has been consumer-led, these measures will further enhance and reinforce the recovery already being driven by consumers, while creating sustainable opportunities for employment and long-term growth.

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The budget delivers for market and households alike, by Victor Muphunga, Head of Research at Private Clients, Old Mutual

The backdrop to this year’s Budget Speech was more positive than we’ve had in a few years. Globally, some of the risks that dominated the narrative a year ago have faded (e.g. tariffs), and investor sentiment towards emerging market assets has improved.

Against that backdrop, the most important macro narrative in the Budget was maintaining fiscal prudence despite higher-than-expected tax revenue. Higher commodity prices, particularly in precious metals, have flowed through to tax receipts, with corporate income tax and net VAT better than expected. In practical terms, this revenue overrun has allowed Treasury to do two things that matter for markets: lower debt servicing costs while avoiding previously mooted tax hikes.

For investors, this will be viewed positively. Lower government borrowing reduces the interest burden over time, increasing the likelihood that more fiscal resources can be directed to productive spending, especially infrastructure. If that spending is executed well, it can lift the economy’s growth profile, crowd in private fixed investment (a persistent weak spot), and ultimately support employment and consumption.

A credible path to debt stabilisation supports local bonds and justifies the currency strength we have seen over the last year. From an equity market perspective, we believe the rerating we’ve seen in our local equity market has room to continue and to spill over into more consumer-focused parts of the market.

There were also tangible household and savings incentives: income tax bracket relief, higher medical tax credits, a higher tax-free investment limit, a raised retirement investment deduction cap, and a larger offshore allowance, which collectively leave more cash in pockets and improve the incentives to save.

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No drama. Just stability, according to Shivani Naidoo, Head of EQT, Old Mutual Wealth

In a year where fiscal populism could easily have taken centre stage, we instead saw revenue windfalls, continued fiscal restraint and debt stabilisation. There were no surprise tax hikes. Personal income tax brackets were adjusted in line with inflation, finally addressing bracket creep and protecting real disposable income. That matters more than it sounds.

Investing does not begin in markets. It begins in your pocket. If disposable income is slowly eroded, your ability to invest consistently weakens. This Budget protects the foundation that long-term wealth is built on, which is the ability to keep contributing.

For self-directed investors, the most meaningful shifts are structural. The annual Tax-Free Savings Account limit has increased to R46 000. That is not just a small adjustment. It expands your tax-free compounding runway. Every rand invested inside a TFSA grows free from dividend withholding tax and capital gains tax. Over ten, fifteen or twenty years, that tax efficiency meaningfully improves outcomes. For newer investors building both habits and capital, this creates more room to grow.

When sentiment improves and the currency firms, investors often feel tempted to reposition. Many reduce offshore exposure or lean more aggressively into local assets. But global exposure is not a currency trade. It is structural risk management and diversification South Africa’s fiscal improvement is constructive, but cycles remain.

It is also important to recognise what has not changed. Dividend withholding tax remains at 20 percent. Capital gains tax inclusion rates remain unchanged. Tax friction still exists, which means unnecessary trading still erodes returns.

Ultimately, this Budget strengthens the framework. It expands flexibility. It improves tax efficiency. It supports diversification. But outcomes will still be determined by investor behaviour.

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Higher RA limits provide much-needed real relief and long-term security by Michelle Acton, Chief Customer Officer, Old Mutual Corporate

We strongly welcome Finance Minister Enoch Godongwana’s decision to raise the retirement fund deduction cap from R350 000 to R430 000. I see this as a meaningful step in reinforcing South Africa’s long-term retirement savings system.

This change is part of a bigger system, and every step in the right direction helps. Increasing the deduction cap will improve member outcomes, as members can contribute more through tax deductions. For middle- and higher-income members, tax deductions are a significant incentive.

We believe that incentives are most effective when they operate within a well-structured retirement framework. In a constrained income environment, fund design does much of the heavy lifting. Our research consistently shows that preservation, appropriate contribution levels, and well-calibrated defaults are what ultimately shift retirement outcomes over time. When supportive tax policy and well-structured retirement systems operate together, we move from offering incentives to delivering real retirement security.

We note further that the increase in the de minimis threshold from 247 500 to R360 000 provides practical support for members with smaller savings balances at retirement, allowing greater flexibility where accumulated amounts are modest.

National Treasury has further indicated that proposals relating to unclaimed benefits will be released. We look forward to seeing the revised proposal and absolutely support initiatives that improve the system’s ability to reconnect unclaimed benefits with their rightful members.

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Clarity and stability for the short-term insurance sector, by Lerato Bacela, Financial Director, Old Mutual Insure

The Budget reduces policy uncertainty, which is critical for underwriting confidence and long-term pricing discipline in the short-term insurance market. The significant shift toward infrastructure investment should, over time, improve asset reliability, reducing business interruption exposures and stabilising claims trends.

At the same time, persistently high debt service costs and modest growth projections signal that premium growth will likely track inflation rather than accelerate sharply, reinforcing the need for underwriting profitability.

ENDS