Budget 2026 High(Low)Lights

R12 billion in savings identified through TARS programme

National Treasury’s Targeted and Responsible Savings (TARS) programme has identified some R12 billion in wasteful and ineffective programs within government.

This according to Finance Minister Enoch Godongwana who delivered the 2026 Budget Speech in Parliament on Wednesday.

“[In] the Budget last May, we promised that spending priorities would not be funded through tax increases if this could be avoided. We have kept that promise, through our commitment to finding savings from unproductive expenditure, closing leakages, and rooting out inefficiencies.

“I am happy to announce that R12 billion in savings have been identified over the medium term,” Godongwana said.

He emphasised that the TARS are not once off initiative and will be entrenched going forward.
“They will be an ongoing and entrenched part of the budget process going forward to weed out inefficiencies and low-performing programmes.

“Every programme and every allocation must demonstrate value, efficiency and accountability,” he said.
Savings were realised in the Public Transport Network Grant which has been scaled down by some R8.4 billion, over the next three years.

“The grant has not improved access to public transport relative to the investments made. The grant will, however, continue to help cover indirect costs in cities that run bus services,” the Minister said.

Social grants were also earmarked as a potential savings target.

“Enhanced targeting of social grants authentication of beneficiaries to reduce fraud in the grant system will yield R3 billion of savings. The South African Social Security Agency has upgraded its biometric and income verification processes, resulting in nearly 35 000 grants being identified as incorrect or fraudulent, and therefore terminated.

“Honourable Members, we are committed to improving access for the many South Africans deserving and eligible for social support. Abuse of the system will not be tolerated,” Godongwana said.

The judiciary, border management, defence and Statistics South Africa will be allocated the remaining savings.

In the 2026 Budget Review, National Treasury highlighted that TARS is part of efforts to “rationalise the operations of the state, improve the effectiveness of service delivery, eliminate waste, address underperformance and reduce duplication.”

“Consultations across government ministries and departments are under way to conclude each change and identify further savings.

“In most cases government is reallocating or shifting savings to priority areas or spending pressures, for example within the transport sector, thus removing the need for additional allocations,” Treasury explained.

Anchoring sustainable public finances

The National Treasury announced that in consultation with Cabinet, it will “undertake detailed analytical work to prepare legislation to anchor sound fiscal principles in law”.

The move is aimed at entrenching commitment to healthy public finances.

“To build confidence and maintain the gains of fiscal consolidation without resorting to painful spending cuts or tax increases, the National Treasury will propose a principles-based obligation to anchor fiscal sustainability in law.

“It will require each new government to table a plan to ensure that the fiscal position is sustainable throughout its term of office and that an appropriate fiscal metric is selected to measure compliance.

“[The plan is] an essential element in the provision of health, education, water, shelter and other socioeconomic rights in line with the Constitution. Without sustainable public finances debt-service costs will consume ever more of the economy’s available resources, eroding investment, productive capacity and living standards,” Treasury said.

The approach, Treasury explained, is also aimed at avoiding unsustainable practises that are “damaging” to national development.

“In particular, the proposal is informed by recent experience. Since 2008/09, government’s debt ratio has more than tripled. Debt-service costs have risen from 8.8 per cent of revenue to 21.3 per cent in 2025/26, crowding out other spending. It has taken a large-scale consolidation effort to rein in debt for the benefit of all South Africans,” said Treasury.

A consultation paper will be published outlining proposals with an announcement expected to be made later this year in the Medium-Term Budget Policy Statement.

Infrastructure remains the ‘bedrock’ of SA economic growth

Finance Minister Enoch Godongwana has reiterated government’s commitment to making infrastructure investment the bedrock of the country’s growing economy.

The Minister tabled the 2026 Budget Speech in Parliament on Wednesday.

“Infrastructure investment remains the foundation upon which long-term economic growth, improved service delivery and job creation are built.

“Government is shifting the composition of spending towards growth-enhancing public infrastructure,” he said.

During the Budget Speech last year, Godongwana announced that some R1 trillion would be allocated for infrastructure investment over the medium term.

Of this allocation:

• R577.4 billion will be spent by state-owned companies and other public entities;
• R217.8 billion by provinces; and
• R205.7 billion by municipalities.

Transport and logistics will make up the lion’s share of expenditure.

Project funding

The Minister noted that since the shift from annual to quarterly funding windows, the Budget Facility for Infrastructure (BFI) has approved some “R21.9 billion for five major projects”.

“These include Transnet’s coal and iron ore corridor projects, which will restore rail capacity to 77 million tonnes for the coal line and 60 million tonnes for the ore line, and the Polokwane regional wastewater programme.

“As part of the efforts to position infrastructure as an investable asset class, government issued an infrastructure bond in 2025 raising R11.8 billion to support its contribution in BFI approved projects,” Godongwana said.

The facility’s call for proposals for the 2026/27 cycle opens today with a detailed circular available on National Treasury’s website.

“We call on public institutions in key sectors of the economy to submit proposals with funding gaps and strategic value, for consideration.

“This includes critical social infrastructure such as courts, correctional facilities, police stations and even the development of new tertiary institutions like the proposed Ekurhuleni University and student accommodation, as well as health care facilities such as the Dr George Mukhari Academic and the Inkosi Albert Luthuli Hospital,” Godongwana said.

Proposed VAT increase officially withdrawn

Government has officially withdrawn the R20 billion tax increase for Value Added Tax (VAT) that was previously penciled in for the 2026 Budget, to provide inflationary relief to taxpayers.

Tabling the 2026 Budget in Parliament on Wednesday, Minister of Finance Enoch Godongwana explained that the withdrawal was due to the tax system demonstrating resilience despite slow economic growth.

“For 2025/26, the gross tax revenue is revised up by R21.3 billion compared to the estimate in the 2025 Budget. Higher-than-expected net VAT, corporate income tax, and dividends tax collections improved the in-year outlook.

“As a result, the government has decided to withdraw the R20 billion in tax increases provisionally included in the May 2025 Budget. The improving fiscal position allows us enough room to withdraw the proposed tax increases, without putting fiscal sustainability or economic activity at risk,” the Minister said to a joint sitting of Parliament in  Cape Town, to much applause.

Government is also proposing additional tax measures to ease the financial burden on households and businesses by adjusting personal income tax brackets and rebates fully in line with inflation.

“Our national savings and investment rate is far below the levels needed to truly create generational wealth and support local investment in the economy,” he said.

To encourage South Africans to save more, government had proposed the tax-free annual investment limit be increased from R36 000 to R46 000 per year.

Furthermore, the limit to retirement fund deductions should be raised from R350 000 to R430 000, allowing individuals to invest more each year on a tax-free basis.

VAT registration for small business

Government has increased the compulsory VAT registration threshold from R1 million to R2.3 million.

“We are taking other measures to support small businesses. We are raising the capital gains tax exemption for the sale of a small business for older persons from R1.8 million to R2.7 million. This applies to small businesses worth R15 million instead of the R10 million previously. It will enable small business owners to receive more tax relief when they sell their businesses,” the Minister said.

Sin taxes

Consumers can expect to pay more for tobacco, alcohol, and petrol from 1 April 2026.

“Increases to certain taxes are unavoidable. For 2026/27, excise duties on tobacco will be increased in line with inflation. This includes excise duty on electronic nicotine and non-nicotine delivery systems.

As a result: 
•    The tax on a 20-pack of cigarettes rises from R22.81 to R23.58.
•    Pipe tobacco rises by 28 cents per 25 grams, and cigarette tobacco by 87 cents per 50 grams.
•    Cigars rise by R4.56 per 23 grams.

The excise on alcoholic beverages also rises by inflation.

As such: 
•    A 340 millilitre can of beer or cider increases by eight cents.
•    A 750 millilitre bottle of wine goes up by 15 cents.
•    A 750 millilitre bottle of spirits will increase by R3.20.

In terms of fuel levies, the total increase will also be in line with inflation.
•    The general fuel levy will go up by nine cents per litre for petrol and eight cents per litre for diesel.
•    The carbon fuel levy will go up by five cents per litre for petrol and six cents for diesel.
•    The Road Accident Fund levy will increase by seven cents per litre.

Social grants to increase

All social grants, barring the COVID-19 Social Relief of Distress (SRD) grant, will increase in the next financial year.

This is according to the 2026 Budget Review released by National Treasury on Wednesday.

The grant increases are as follows:

• Old age grant will increase from R2 315 to R2 400.
• War veterans grant will increase from R2 335 to R2 420.
• Disability grant will go up from R2 315 to R2 400.
• Foster care grant rises from R1 250 to R1 295.
• Care dependency grant will increase from R2 315 to R2 400.
• Child support grant will go up from R560 to R580.
• The grant-in-aid will increase from R560 to R580.

The SRD grant will remain at R370, with payments to continue until next year.

“Social grants constitute the largest share of spending on social development. Excluding the [SRD] grant, spending increases from R246.6 billion in 2025/26 to R276.5 billion in 2028/29. The social relief of distress grant is allocated an additional R36.4 billion to extend payments until 31 March 2027 at the current R370 per month per beneficiary.

“The social grant allocation has been adjusted down over the medium-term in line with a lower inflation outlook and improved grant targeting and verification, which is expected to yield savings of R2 billion in 2026/27 and R1 billion in 2027/28,” the department said.

The Social Development function’s overall budget will increase by some 4.2%, rising from R412.2 billion in 2025/26 to R466.4 billion in 2028/29.

“This supports poverty reduction by providing social grants, risk benefits through social insurance and welfare services. It also funds development initiatives, empowerment programmes, gender equality efforts, and advocacy for children, women, youth, the elderly and people with disabilities,” the budget review read.

Tightening controls

National Treasury reported that the 2025/26 allocation for the South African Social Security Agency (SASSA) was made conditional on the agency “improving biometric and income verification processes, undertaking more frequent eligibility reviews for social grants, and implementing other measures to tighten compliance”.

“By December 2025, the agency had checked the bank accounts of about six million clients and eight million credit bureau clients. These checks flagged 291 581 grant beneficiaries for review.

“As a result of the review process and strict implementation of the sliding scale, which bases grant values on recipients’ incomes, grant amounts were adjusted for 8 599 disability and old‑age grant recipients in accordance with the eligibility criteria.

“This results in projected savings of R36.4 million in 2025/26. A further 34 661 grants were cancelled, generating expected savings of R170.7 million by the end of 2025/26,” the department said.

The agency has rolled out biometric verification for new applicants to “strengthen beneficiary authentication”.

“It will intensify efforts to combat fraud and corruption, while ensuring that legitimate beneficiaries remain protected,” Treasury said.

2026 Budget Speech a ‘turning point’ – Godongwana

The country’s financial future was on the agenda on Wednesday when Finance Minister Enoch Godongwana delivered the 2026 Budget Speech in Parliament.

Godongwana noted that this year’s Budget Speech comes at a critical juncture for the public purse.

“We have reached an important turning point in the management of our public finances. Five years ago, the outlook was stark. State Capture had hollowed out critical institutions and weakened state owned entities. South Africa had been downgraded to junk status by the last of the three major credit rating agencies in 2020.

“The devastation of the Coronavirus pandemic coupled with the Russia-Ukraine conflict had dealt a blow to global growth. And in 2023, the Financial Action Task Force had placed South Africa on its grey list.

“The warning lights were flashing. Public finances were under severe strain and growth had stalled. Faced with this crisis, we chose not to be defined by it. Instead, we turned it into a catalyst for change,” he said.

Reforms

As a result of a long-standing commitment to change through a clear reform agenda and a disciplined fiscal strategy, South Africa’s public debt is expected to stabilise this financial year – growth is on the cards with a decline forecasted in the medium term.

“Today, that commitment has delivered tangible results. For the first time in 17 years, debt will stabilise and it will continue to fall in the coming years. The budget deficit has narrowed significantly, and debt-service costs are also falling.

“The world has taken notice: South Africa has been removed from the FATF [Financial Action Task Force] grey list; we secured our first credit rating upgrade in 16 years; and borrowing costs have eased, creating space for growth and development.

“These are signals of restored credibility. Of renewed resilience. And of a nation regaining its footing. The lesson is a simple but powerful one: steady structural reform and responsible public finances are the bedrock of a prosperous and more inclusive South Africa,” the Minister noted.

Strong outcomes

The numbers crunched by National Treasury in the 2026 Budget Review concur with Godongwana’s optimism.

The review reports that the main budget deficit comes in R12.4 billion lower than forecasted in last year’s budget because of “strong fiscal outcomes for the first 10 months of 2025/26”.

Since the 2021/22 financial year, the main budget deficit has narrowed from 5.1% of Gross Domestic Product (GDP) to a projected 4.5% in 2025/26.

It is further projected to decline to 2.9%  in 2028/29.

“In 2023/24, the primary balance swung from deficit to surplus for the first time since the 2008 global financial crisis. It will grow to 2.3 % of GDP in 2028/29.

“As a result, debt as a share of GDP will decline over the next three years and the cost of servicing that debt will reduce from 21.3% of revenue in 2025/26 to 20.2% in 2028/29.

“These developments reflect a determined approach to repair the public finances while creating a foundation for stronger and sustainable economic growth,” said Treasury.

The consolidated budget deficit also continues to decline over the medium-term expenditure framework (MTEF) period
It is expected to narrow from 4.5% of GDP in 2025/26 to 3.1% in 2028/29.

“Gross loan debt stabilises this year at 78.9%  of GDP. Debt-service costs continue to rise in nominal terms, from R420.6 billion in 2025/26 to R469.3 billion in 2028/29, but as a percentage of revenue they also peak in the current financial year and then decline,” Treasury noted.

Reflecting on the progress made, National Treasury stated that government is “delivering on its pledge to rebuild the health of the public finances”.

“After a long stretch of rising debt that began in the wake of the 2008 global financial crisis, government debt peaks as a share of economic output in the current fiscal year.

“Government is working to ensure a steady decline in debt as a share of GDP for the rest of the decade, reducing the cost of servicing debt and creating a more supportive environment for private investment.

“For the first time this decade, government is tabling a fiscal framework in which debt service costs grow more slowly than overall expenditure. Over the next three years, principal and interest payments are expected to be R21 billion lower than estimated in the 2025 Medium Term Budget Policy Statement (MTBPS),” the Budget Review said.

Strategy

The shift towards improvement has been anchored on three principles: stabilise debt, invest in infrastructure and spend better.

“The benefits of this strategy have started to become evident. Enhancing monetary policy certainty and consistent delivery on the fiscal strategy have prompted a virtuous cycle, especially in the period following the tabling of the 2025 MTBPS.

“South Africa received its first sovereign credit rating upgrade by one of the major agencies since 2009. Lower inflation and stronger public finances have boosted confidence and reduced risk, leading to lower borrowing costs and stronger investment conditions.

“Much work is needed to improve the delivery of public goods, but the recent removal of South Africa from the Financial Action Task Force grey list illustrates the depth of capacity that can be assembled. Government will build on this success in other areas,” National Treasury said.

Crime fighting receives major boost

Government has allocated R848.2 billion over the medium term to combat crime and ensure territorial integrity. 

This is in line with the announcement by President Cyril Ramaphosa in the State of the Nation Address on the deployment of the South African National Defence Force (SANDF) alongside the police to fight illegal mining and gangsterism.

According to the National Budget Treasury review, the allocation seeks to build a capable, ethical, and developmental state through safer communities, improved prosecution, and effective border management. 

“To support this and other efforts to intensify law and order, spending on peace and security increases from R268.2 billion in 2025/26 to R291.2 billion in 2028/29.

“The Border Management Authority has been allocated an additional R990 million over the medium term to build capacity by filling 738 positions,” Minister of Finance Enoch Godongwana said on Wednesday in Parliament.

A total of R2.7 billion has been added to Defence over the medium term to improve operations, including to maintain the South African Air Force’s fighter capability. 

“In addition, we have allocated R1 billion to the police service, and another R1 billion to the South African National Defence Force (SANDF), through the CARA [Criminal Assets Recovery Account] fund for the fight against organised crime.

“Over the medium term, R883.8 million is shifted from the Department of Justice and Constitutional Development to the Office of the Chief Justice,” Godongwana said.

This will enable the Office of the Chief Justice to manage its own budgets, enhancing its independence from the Executive from the first of April.

Similar arrangements for the funding of Parliament are being undertaken in the spirit of separation of powers.

“An additional R687 million has been allocated to increase capacity in the judiciary. The President also announced the establishment of specialised courts. Once the cost is finalised, allocation for this will be considered later in the year. 

“For the various commissions of inquiry underway that are unlikely to finish within their initial deadlines, funding will also be made available when the costs become clearer,” the Minister said.

HIV/Aids research funding bolstered

Government will allocate some R410 million over the medium term to offset the funding gap in research left after the withdrawal of funding by the United States.

This according to the National Treasury’s 2026 Budget Review released alongside the Budget Speech on Wednesday.

“Over the medium term, R410 million will be reprioritised from the Department of Health to the South African Medical Research Council to offset research grant funding withdrawn by the United States.

“This allocation forms part of a co-funding arrangement with global donors to sustain key HIV/AIDS research programmes,” the department said.

Overall spending on health will grow by some 4.2% to R334.3 billion in 2028/29.

“Primary healthcare, delivered through district health services, provides the most accessible and cost-effective care and 44.4% of the health budget is allocated to this.

“Compensation of employees continues to constitute the largest share of the health budget at 64.6%. Government seeks to enhance efficiency in this area through better management of commuted overtime and rural allowances,” the review read.

An advisory committee has been appointed by Health Minister Aaron Motsoaledi to recommend “amendments to key human resources policies and practices”.

“These and other savings measures will enable the sector to reprioritise funds to deal with existing pressures and respond to emerging service delivery needs and priorities.

“[Some] R24 million is reprioritised over the MTEF period towards the Office of Health Standards Compliance to enable it to fill critical posts and increase the number of health facility inspections conducted each year,” the review said.

Education and training

Meanwhile, National Treasury announced that a review of the national skills ecosystem will be undertaken in the coming year.

“The skills development levy paid by employers funds the sector education and training authorities and the National Skills Fund to provide skills development and training. Levy income is projected to be R88.2 billion over the 2026 MTEF period.

“These institutions are struggling to deliver the skills required to drive economic growth. The National Treasury has commissioned the Government Technical Advisory Centre to conduct a comprehensive review of the national skills ecosystem in the year ahead,” Treasury said.

Post-school education and training will receive an allocation of R155.8 billion for the 2026/27 financial year.

“The National Student Financial Aid Scheme will spend R54.3 billion in 2026/27 to provide bursaries to enable 744 203 poor and academically deserving students to access universities and technical and vocational education and training colleges,” the budget review said.

Basic education has been allocated some R358.6 billion during the same period.

“The National School Nutrition Programme provides meals to over 9.9 million learners in 19 800 schools. Allocations to the programme grow by 4.5 per cent to R33.9 billion over the medium term and have not been adjusted for the lower inflation outlook given that food price inflation is higher than the overall inflation rate.

“Expenditure on early childhood development increases from R12.2 billion in 2025/26 to R18 billion over the medium term. This will enable early childhood development services to be expanded to an additional 300 000 children,” Treasury noted.

Reforms introduced to improve local government

Government has announced strengthened measures to improve the operations and financial management of local and provincial government, marking a shift to structural intervention from oversight.

“At the municipal level, this shift involves changes to legislation, governance arrangements, and technological intervention. In provinces, the government is enforcing strict headcount controls and compensation discipline,” according to the 2026 Budget Review by National Treasury.

Local government is the sphere where communities experience the state most directly, but many municipalities are in financial and operational distress and therefore unable to deliver services as they should.

“Audit outcomes highlight this unacceptable reality: 63% of municipalities are in financial distress, and the proportion of clean audits remains unacceptably low. A central challenge with municipalities is that they not only differ in capacity but also in their revenue-raising potential. 

“This demands a more targeted approach to respond to the diverse pressures facing municipalities. The National Treasury is revitalising support for development of long-term financial plans,” Minister of Finance Enoch Godongwana said on Wednesday, in Parliament.

These plans will improve project identification, sustainably plan cash flows, and inform financial decisions. 

“This will negate the challenge of unfunded mandates and limited capacity to maintain infrastructure and sustain services. Further structural reforms are underway, including a comprehensive review of the local government fiscal framework. 

“Together, these reforms will modernise the intergovernmental system and build a more capable, resilient and appropriately differentiated local government sphere,” the Minister said.

Godongwana made these remarks when he tabled the 2026 Budget, which outlined all the financial, economic, and social commitments that the government will prioritise in its planned expenditure.

The Municipal Finance Management Act (MFMA) Amendment Bill, scheduled for public comment in early 2026, forms the legal backbone of the reform package. 

It will support the local government fiscal framework by enforcing funded budgets, strengthening expenditure controls and consequence management, and clarifying the treatment of irregular expenditure to focus on financial losses. 

The bill will strengthen monitoring and intervention tools for the national and provincial treasuries, including more effective financial recovery measures and clearer safeguards during interventions.

In terms of governance, the state is strengthening its intervention framework for municipalities in severe financial distress. 

Municipal Infrastructure Grant reform

Government is also reforming the municipal infrastructure grant to address persistent underspending, misuse of funds, and capacity constraints that hinder effective service delivery in non-metropolitan municipalities.

“A split delivery model has been introduced. Municipalities with proven capacity will continue to receive funding directly. However, where there are serious capacity or governance failures, the delivery will shift to an indirect model.

“Capable district municipalities and other accredited implementing agencies will form part of their infrastructure delivery suite. The intention is to protect citizens from persistent municipal dysfunctions that have long undermined effective service delivery,” Godongwana said.

Provincial government

Provinces have begun to eliminate duplication and focus resources on activities with the greatest impact for citizens. 

In 2026, three provinces plan to conduct comprehensive spending reviews.

“To reduce compensation pressures, provinces are tightening staffing and compensation controls (including headcount verification), closely monitoring overtime and improving efficiency in support services such as security, catering and fleet. Several provinces have merged agencies in recent years to reduce overheads,” National Treasury said.

Government will implement efforts to reduce medico-legal claims.

“Provinces spend an average of R1.5 billion each year on settling these claims – funds that could otherwise support frontline health services. 

“Efforts to reduce such claims include strengthening patient recordkeeping and safety systems, upgrading infrastructure, promoting mediation, conducting investigations and ensuring health staff work in their areas of expertise,” National Treasury said.