Godongwana's 2026 Budget Declares Debt Stabilised, Cancels Planned Tax Hike, Commits R1 Trillion to Infrastructure

Godongwana's 2026 Budget Declares Debt Stabilised, Cancels Planned Tax Hike, Commits R1 Trillion to Infrastructure

CAPE TOWN, 25 February 2026. Finance Minister Enoch Godongwana presented South Africa's 2026 national budget to Parliament on Wednesday, declaring that gross government debt had stabilised for the first time in 17 years and cancelling a previously planned R20 billion personal income tax increase after stronger-than-expected 2025 revenue collections, while committing R1 trillion in public infrastructure spending over three years.

Gross debt stabilised at 78.9% of GDP in 2025/26, then declines to 77.3% of GDP in 2026/27 and to 76.5% by 2028/29. The consolidated budget deficit narrowed to 4.5% of GDP in 2025/26, with further improvement to 4% in 2026/27 and 3.1% the following year. Borrowing for 2026 would fall to R380 billion from R563 billion in 2025, though debt service costs, the annual interest bill, remained substantial at R432.4 billion. Godongwana noted that for the first time in a decade, interest payments were projected to grow more slowly than spending on education and health.

The cancellation of the income tax increase was the budget's most direct benefit to individual taxpayers. Tax brackets will rise with inflation, the first such adjustment since 2024, returning fiscal drag to taxpayers rather than serving as a passive revenue windfall for the fiscus. Tax-free savings account annual limits were raised to R46,000 from R36,000, and the retirement fund deduction ceiling increased from R350,000 to R430,000. Small businesses received significant relief through an increase in the compulsory VAT registration threshold from R1 million to R2.3 million.

On the spending side, Godongwana confirmed the government's R1 trillion infrastructure commitment over three years, encompassing logistics, energy, water, and sanitation projects aligned with the State of the Nation Address commitments. Total consolidated expenditure for 2026/27 would reach R2.67 trillion, with basic education, health, and social protection constituting 70.3% of the social wage, supporting 13.6 million school children, healthcare for 84% of the population, and social grants for 26.5 million beneficiaries. HIV/AIDS programmes received R26 billion over three years.

Economic growth was projected at 1.6% for 2026, improving from 1.4% in 2025, with inflation forecast at approximately 3.4%. Economists broadly welcomed the fiscal discipline on display but cautioned that 1.6% growth would not be sufficient to meaningfully reduce unemployment, which remained above 31%.

South Africa's national budget is tabled annually in the last week of February. The Appropriation Bill and the Division of Revenue Bill were introduced simultaneously.