Overview of the 2026 Budget
The 2026 Budget marks a fiscal turning point, with South Africa achieving stabilisation of the debt‑to‑GDP ratio for the first time since the 2008 financial crisis. Real GDP growth is expected to rise from 1.4% in 2025 to 1.6% in 2026, reaching 2% by 2028, supported by structural reforms, improved confidence and easing inflation. Consolidated expenditure will grow from R2.58 trillion in 2025/26 to R2.89 trillion in 2028/29, maintaining a strong emphasis on the social wage (~60% of non‑interest spending).
Healthcare Spending
- Healthcare remains a core redistributive component of the Budget.
Total Health Allocation
- Health expenditure grows to R310.4 billion in 2026/27, at an average annual rate of 4.2%. This supports district health services, central hospitals, provincial hospitals and broader system‑wide functions.
Funding Priorities
- District health services receive the largest share (R137.8 billion).
- Compensation of employees accounts for 64.6% of health spending, highlighting the labour‑intensive nature of the sector.
Infrastructure Emphasis
- Capital payments are the fastest‑growing expenditure category, increasing by 9.7% annually, including investment in health facilities.
Social Development & Grants
Grant Expenditure
- Social development spending increases to R446.6 billion in 2026/27, growing at 4.2% annually.
- Social grants account for R292.8 billion in 2026/27, rising to R316.2 billion by 2028/29.
Grant Values (from 2026/27)
- Old Age / Disability / Care Dependency: R2,400
- Child Support & Grant‑in‑Aid: R580
- Foster Care: R1,295
SRD Grant
- The Social Relief of Distress (SRD) grant continues with R36.4 billion allocated, alongside improved verification processes resulting in material savings by flagging ineligible beneficiaries.
Tax Proposals for 2026/27
Personal Income Tax Adjustments
- Full inflationary adjustment to tax brackets and rebates after two years without relief.
- Medical tax credits increase to R376 (first two beneficiaries) and R254 (each additional dependant)
Excise Duties
- Alcohol and tobacco excise duties increase by 3.4%.
- Vaping product excise duties rise by 3.4%.
Fuel & Carbon Taxes
- General Fuel Levy increases to R4.10/litre (petrol) and R3.93/litre (diesel).
- Carbon tax increases to R308/tonne CO₂e from January 2026.
- Carbon fuel levy rises to 19c/litre (petrol) and 23c/litre (diesel).
Tax Revenue Outlook
- Gross tax revenue increases to R2.01 trillion (2025/26), R2.13 trillion (2026/27) and R2.38 trillion (2028/29).
- The tax‑to‑GDP ratio stabilises at 26.1% over the medium term.
Savings & Retirement Threshold Adjustments
- The 2026 Budget includes several inflation‑aligned increases to savings and retirement‑related tax thresholds. All items below originate from Treasury’s reviewed threshold tables.
Tax‑Free Investment (TFI) Limit
- Annual contribution limit increases from R36,000 to R46,000.
Retirement Fund Contribution Deduction
- Annual cap increases from R350,000 to R430,000, still limited to 27.5% of taxable income.
Retirement Interest De Minimis (annuitisation threshold)
- Threshold increases from R247,500 to R360,000, allowing members with retirement interests at or below this value to take the full amount as a lump sum.
Living Annuity Commutation
- Threshold increases from R125,000 to R150,000.
- These adjustments meaningfully enhance the ability of households to save tax‑efficiently and improve retirement flexibility.
Spending Priorities by Function (2026/27)
- Learning & Culture: R527.2bn
- Health: R310.4bn
- Social Development: R446.6bn
- Community Development: R294.3bn
- Economic Development: R283.9bn
- Peace & Security: R274.6bn
Efficiency Measures & Cost Containment
- The Targeted and Responsible Savings (TARS) initiative identifies R12 billion in savings.
- The Early Retirement Program has approved 7,687 applications, generating R5.5 billion net savings.
- A national ghost worker audit has flagged 4,323 high‑risk payroll cases.
Economic Outlook
- GDP growth: 1.4% (2025) → 1.6% (2026) → 2.0% (2028).
- CPI inflation: 3.2% (2025) → 3.4% (2026) → 3.2% (2028).
- Debt‑to‑GDP ratio: stabilises at 78.9% in 2025/26, declining gradually thereafter.
Key Takeaways for Employers & Members
- Inflation‑adjusted PIT brackets and higher medical credits provide modest tax relief.
- Health spending continues to rise, with targeted investment in district health services and personnel.
- Social grants continue to expand, supported by stricter verification.
- Fuel, carbon and excise tax increases may raise consumption and transport costs.
- Fiscal consolidation and debt stabilisation strengthen long‑term economic resilience.
2026 Budget Speech by the Minister of Finance