The Minister of Finance has delivered a budget speech that has, at least initially, been met with a broadly positive response.

Unlike previous years, there were almost no major tax increases.

Most notably, Treasury corrected what is commonly referred to as “tax bracket creep” — the silent erosion of income through inflation-adjusted earnings that push taxpayers into higher brackets even when their real purchasing power does not increase.

This year’s adjustment means that tax tables were properly aligned with inflation, providing relief that was absent in the previous fiscal cycle.

 

The speech placed significant emphasis on infrastructure spending as a catalyst for job creation and economic expansion.

At the same time, the Minister underscored the importance of containing debt service costs, which continue to pose a major risk to fiscal sustainability.

Although a primary surplus has been achieved — aided in part by stronger-than-expected revenue collection from SARS — the overall deficit remains around 4. 5%, highlighting that the country is not yet out of fiscal danger.

 

To unpack the implications of this budget, economist Milan Cabel, Chief Economist at Andiswa Capital Partners, and Colin Ties, Regional Director at Xero for the AMEA region, offered contrasting perspectives.

 

Milan Cabel expressed skepticism that the budget would meaningfully alter South Africa’s growth trajectory.

While infrastructure was highlighted as a priority, he argued that allocations to economic infrastructure were not as substantial as hoped.

Instead, over R1.58 trillion — more than 60% of total expenditure — remains directed toward social services.

In Cabel’s view, this signals that South Africa continues to present what he described as a “welfare budget. ” While social spending is necessary, he contends that it does not generate the type of transformative economic growth required to absorb the country’s roughly eight million unemployed individuals.

He argues that without significantly increasing capital investment into growth-driving sectors, the economy risks remaining stagnant.

 

Cabel had previously projected 1. 6% growth for 2026, with 1.8% over the medium term — figures aligned with Treasury, the IMF, and World Bank forecasts.

However, he warned that even these modest projections could be difficult to achieve without stronger investment in productive sectors.

According to him, the budget does not represent a meaningful shift from the previous year; it largely reflects inflation-based adjustments rather than structural transformation.

 

On the other hand, Colin Ties offered a more optimistic interpretation, particularly regarding tax policy and small business reforms.

He acknowledged that corporate income tax collections have improved, partly driven by the commodities boom in mining.

However, he cautioned that this should not automatically be interpreted as a surge in overall business confidence.

Structural challenges remain, particularly in making tax compliance easier for businesses.

 

One of the most significant reforms welcomed by Ties is the increase in the VAT registration threshold from R1 million to R2. 3 million in annual turnover.

While this adjustment accounts for inflation, its real impact lies in reducing the administrative burden on small businesses.

For entrepreneurs trying to establish and grow companies, compliance costs can be prohibitive.

Raising the threshold eases pressure and lowers barriers to formal participation.

Another noteworthy reform is the increase in the capital gains tax threshold for the sale of small businesses, moving from R10 million to R15 million.

While the numerical increase may appear modest, Ties emphasized the broader significance.

It encourages small business owners to think strategically about building and eventually selling their enterprises.

The ability to exit profitably is a critical incentive for entrepreneurship.

By creating slightly more favorable tax conditions for mergers and acquisitions at the SME level, government signals support for business growth and formalization.

 

Importantly, Ties stressed that the value of these reforms lies not only in their financial impact but also in the conversations they stimulate.

Many small business owners are not fully aware of capital gains tax implications or strategic exit planning.

Increased visibility around these thresholds encourages better financial planning and professionalization.

 

The correction of tax bracket creep was also welcomed.

Adjusting brackets for inflation means individuals — including business owners who draw income through salaries or dividends — retain more of their earnings.

This provides room to reinvest in businesses, reward employees, and strengthen teams.

In an environment where wage pressures and living costs are persistent, such relief is meaningful.

Returning to the broader macroeconomic picture, the Minister cited structural reforms — particularly in electricity and logistics — as positive contributors to future growth.

Cabel acknowledged that reforms at Eskom over the past two to three years have been beneficial.

Improvements in generation stability and transmission capacity, supported by partnerships including World Bank-backed guarantees, could provide much-needed relief to energy-intensive sectors such as mining and manufacturing.

 

Reliable electricity at manageable cost is fundamental for production growth.

If reforms continue successfully, mining and manufacturing firms could expand output while reducing input costs.

However, Cabel cautioned that this alone may not be sufficient to drive robust economic expansion.

 

Logistics reform, particularly within Transnet, is another critical area.

Concessions and private sector partnerships aimed at improving port operations and supply chain efficiency are seen as essential.

South Africa’s ability to trade competitively depends heavily on efficient ports and rail systems.

Improved connectivity could enhance participation in the African Continental Free Trade Area (AfCFTA), opening new export opportunities.

Cabel emphasized that unlocking trade potential within Africa may help offset domestic industrial weaknesses.

However, this requires sustained investment and consistent policy execution.

Overall, the budget presents a careful balancing act.

It avoids aggressive tax hikes, corrects bracket creep, and introduces incremental reforms favorable to small businesses.

It maintains a focus on infrastructure while preserving substantial allocations to social services.

Yet critics argue that it stops short of delivering the transformative growth strategy needed to break out of economic stagnation.

 

Debt stabilization and inflation moderation — currently around 3. 2% — offer signs of macroeconomic stability.

However, the challenge remains translating fiscal stability into tangible employment growth.

 

The coming months will reveal whether projected growth rates of 1. 6% to 1.8% materialize.

Much will depend on sustained energy reform, improved logistics performance, global commodity conditions, and effective policy implementation.

For now, the budget signals continuity rather than radical departure — stability rather than dramatic acceleration.

Whether that is sufficient in a country grappling with high unemployment and persistent inequality remains the central question.