Professor Deon Tustin warns that despite fiscal improvements, limited relief for households and businesses leaves many South Africans struggling to cope with rising costs.
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South Africa’s 2026 national budget, presented by Finance Minister Enoch Godongwana, has been hailed by markets for its emphasis on stability, predictability, and fiscal discipline. The budget marks a turning point for the country, with debt-to-GDP stabilizing for the first time in 17 years. Additionally, growth projections are set at 1.6% for 2026, rising to 2% by 2028.
While these macroeconomic indicators signal positive momentum, Professor Deon Tustin, CEO of the Bureau of Market Research at the University of South Africa, argues that the real impact of the budget will be felt by South African households and businesses. He warns that despite fiscal improvements, the everyday challenges faced by consumers and businesses remain unaddressed.
Macroeconomic Outlook: Stability with Continued Challenges
Minister Godongwana’s speech focused on the government’s success in stabilizing the country’s debt and narrowing the fiscal deficit, touting the R1.07 trillion infrastructure pipeline as a key driver of future growth. The infrastructure spending, aimed at revitalizing sectors like logistics, energy, water, and sanitation, is expected to be a significant catalyst for development over the next few years. "For the first time in years, the country’s fiscal trajectory is improving," the minister stated.
However, Professor Tustin expressed caution in his analysis of the budget’s broader implications. He pointed out that while fiscal discipline is crucial, the real story lies in how these financial policies impact South Africans on the ground.
“While the government has achieved fiscal stability, the reality for consumers and businesses remains more challenging,” Tustin explained. “This budget is more about consolidating gains and restoring fiscal credibility, rather than offering the kind of bold reforms needed to address pressing economic challenges.”
Tustin acknowledged the importance of the government’s fiscal restraint but noted that the effects of the budget will be felt more strongly at the household and business levels, where rising living costs continue to erode disposable incomes.
Impact on Consumers: Stability, but Limited Relief
For South African consumers, the 2026 Budget provides a mix of stability and modest relief. Professor Tustin highlighted several aspects of the budget, emphasizing that while certain tax adjustments may help in the long term, the overall impact on consumer finances will be minimal.
“There was no VAT increase, and no dramatic income tax hikes – a welcome relief after last year’s uncertainty,” Tustin said. “Medical aid tax credits have been adjusted slightly above inflation, and retirement savings incentives have been expanded, with the tax-deductible cap rising to R430,000. The annual tax-free savings limit has also increased to R46,000. These are positive measures that encourage long-term financial planning.”
Additionally, transfer duty brackets have been increased by 10%, which Tustin believes will provide modest relief to property buyers, particularly in the lower and middle segments of the property market. This could stimulate activity in residential property, which has been sluggish in recent months.
However, cost pressures persist. Fuel levies have increased, albeit below inflation, and road accident fund (RAF) and carbon fuel levies have also risen. Excise duties on alcohol and tobacco have increased in line with inflation. While these increases may appear small on an individual basis, Professor Tustin warned that they cumulatively affect household disposable income—especially for middle-income earners who are already grappling with elevated living costs.
Tustin also pointed out that while most social grants have seen increases, the Social Relief of Distress (SRD) grant has been left unchanged. “This means the most vulnerable receive limited additional support in real terms,” Tustin explained. “Consumers have been offered stability, but not substantial relief.”
Impact on Business: Policy Certainty with Ongoing Cost Pressures
For businesses, the budget provides a sense of policy continuity and fiscal credibility, which could improve investor confidence and help contain borrowing costs. The R1.07 trillion infrastructure pipeline, focused on improving key sectors such as logistics, energy, water, and sanitation, offers long-term growth opportunities. Tustin noted that efficient implementation of these projects could significantly boost the economy, particularly in sectors dependent on infrastructure development.
Tustin also praised the increase in the VAT registration threshold from R1 million to R2.3 million, a move that reduces compliance burdens and administrative costs for small businesses. This change is expected to benefit small and medium enterprises (SMEs), which often struggle with regulatory compliance and financial management costs.
“There is also good news for producers of electric and hydrogen vehicles, who will benefit from a 150% first-year tax deduction on production costs. This positions South Africa within the global energy transition, and the incentives could attract significant manufacturing investment,” Tustin stated.
However, Tustin was quick to point out that the fuel levy increases could raise transport and input costs across multiple industries, while the proposed 20% national online gambling tax could reshape profitability in the gambling sector. “These increases in levies and taxes add to the operating costs of businesses, particularly those dependent on transportation and high energy usage,” he said.
The Bottom Line: A Stable Budget, But Limited Relief
While the 2026 Budget delivers fiscal stability, the real-world impact for consumers and businesses remains limited. Tustin concluded, “This Budget was not about bold reform. It was about consolidating gains, restoring credibility, and signaling that South Africa’s fiscal trajectory is improving. For consumers, it offers predictability but limited relief. For businesses, it provides policy certainty and infrastructure opportunities, but with ongoing cost pressures.”
“The success of Budget 2026 will ultimately depend not on the numbers announced, but on execution,” Tustin stated. “Fiscal stability has been achieved on paper. The challenge now is translating that stability into inclusive growth and tangible improvements in daily economic life.”
Tustin emphasized that the real test of the budget's success will be in how these policies translate into practical, everyday improvements for South African households and businesses. For consumers, rising costs and limited tax relief remain significant hurdles, while businesses face rising operational costs despite the promising infrastructure developments.