Godongwana holds better budget cards but economic recovery remains inadequate

Finance Minister Enoch Godongwana will probably have an easier time presenting this year’s budget compared with last year because tax revenue might come in above previous estimates, partly due to a commodity boom and more efficient collection. 

But Godongwana’s GDP forecasts on Wednesday will probably point to an economy   growing far below the levels needed to make a significant dent in high unemployment.

Godongwana had a torrid time with the budget last year, managing to successfully table it only at the third attempt in May after two earlier versions were undone by political dissent over his decision to raise VAT. The minister eventually caved and scrapped the increase after the adoption of the fiscal framework was challenged in court.

This time around, he was “holding better economic cards and fiscal sustainability looks more promising”, professor Raymond Parsons of the North-West University business school said. 

He warned that Wednesday’s tabling of the budget would “not just be a question of balancing the books”. 

“The current economic recovery is still inadequate and uneven. The budget will need to concretise the State of the Nation address (Sona) message in tangible and confidence-building ways,” Parsons said, referring to President Cyril Ramaphosa’s annual speech to parliament on 12 February.

“The test of the 2026 budget strategy will therefore be on how successfully the extra fiscal space is now used to promote job-rich growth, stabilise the national debt and accommodate other socioeconomic priorities.”

He said the budget must help define a clear future trajectory for the economy, if the government of national unity’s (GNU) GDP growth target of 3.5% by 2030 was to be reached.

Outlining government priorities for this year in his address earlier this month, Ramaphosa said they included stepping up the fight against organised crime, using technology, intelligence and integrated law enforcement, as well as tackling widespread water shortages affecting several parts of the country and stimulating economic growth and job creation to meet social and economic challenges. 

Dick Forslund, an economist and researcher at the Alternative Information and Development Centre, said his expectations from the budget speech were “muted”, partly citing tension within the coalition government led by Ramaphosa’s ANC and the former opposition Democratic Alliance.

“The space in the national treasury for civil society is more narrow today than five years ago. I expect budget allocations that don’t address our extreme social crisis and mass unemployment,” he said.

“The one reason is the formal country partnership framework with the World Bank about economic policy, signed in 2021. Another is the GNU alliance. The DA leads openly right-wing parties in favour of more privatisation or with no independent ideas at all. 

“Therefore, the ANC’s outsourcing and tender policies will not be challenged, even if they are a platform for corruption. Public health and education will continue to be underfunded.”

Labour federations Cosatu and the South African Federation of Trade Unions (Saftu) have led calls for a budget that addresses massive unemployment and weak economic growth.

Cosatu spokesperson Matthew Parks, said it was critical that the budget “responds decisively to the pains felt by the working class”.

“It must provide hope to society. The budget must be anchored upon tackling our dangerously high unemployment rate of 41.1% and weak 1.4% economic growth, entrenched levels of poverty, inequality, endemic crime and corruption,” he said.

Saftu general secretary Zwelinzima Vavi noted that South Africa was grappling with large-scale joblessness affecting about 12.4 million people on the expanded definition, as well as deepening de-industrialisation, escalating crime, rising youth exclusion, collapsing municipal services and one of the highest levels of inequality in the world. 

“This budget must respond to this national emergency,” Vavi said.

Parks said it was critical to reduce the ever-rising price of electricity and key to that was for all consumers to be moved to prepaid billing.

“This includes dealing with the R100 billion municipal debt, corruption, acts of criminality, wasteful expenditure and enabling Eskom to enter the renewable energy space,” he said.

Cosatu, said Parks, acknowledged “positive turnarounds” at state ports and rail company Transnet and Metro Rail, which must be expedited, including reducing Transnet’s debt burden, accelerating infrastructure investments and putting security in place to protect commuters and property.

“Efficient rail and ports are key to thousands of mining, manufacturing, agricultural jobs and providing 10 million urban commuters with cheap and quick means to get to work,” he said.

“Decisive turnaround plans need to be put in place for under-siege state-owned enterprises, in particular Denel, the SABC, Post Office and Postbank, which continue to struggle under incompetent management.

Concurring with Cosatu, Vavi said the working class could not withstand another year of austerity, shrinking services and policy drift. 

“The central question before the minister of finance is whether the state will continue prioritising fiscal consolidation over human development — or break decisively with austerity, placing employment, industrial reconstruction and redistribution at the centre of economic policy,” he said.

“Over the past decade, fiscal consolidation has weakened the state’s capacity to deliver services and stimulate growth. Cutting expenditure in an already crippled economy is economically self-defeating. When the state withdraws spending, it removes income from communities dependent on public wages, procurement and social expenditure. Demand shrinks, small businesses collapse and the tax base erodes further.”

South Africa was entering the budget 2026 cycle “at a moment of profound contradiction”, Shell country chairperson Aluwani Museisi said.

“We have ended load-shedding — a national milestone many believed impossible — yet the economy remains trapped below 2% growth,” he said.

“Budget 2026 will test whether the GNU can convert political goodwill into economic momentum. Business optimism is at its highest in years, with PwC reporting that 83% of South African CEOs expect economic growth to improve. But even with this shift in sentiment, growth is forecast at just 1.8% for 2026 — far short of the 3% to 4% required to cut unemployment and poverty meaningfully.”

He said South African Revenue Service  (SA Revenue Service) collections were trailing projections and VAT, the workhorse of the tax system, was under strain. 

“Personal income tax now sits near 10% of GDP, one of the highest burdens in emerging markets. This makes it unlikely that the minister will pursue broad-based tax hikes this year,” Museisi said.

South Africa had “a narrow but real window to realign its fiscal path with economic growth and climate ambition,” he said. To succeed, budget 2026, must deliver on honest trade-offs, realistic growth assumptions, policy certainty supporting long-term investment, clear, enforceable infrastructure timelines and a coherent financing plan for climate resilience.

“Business leaders, investors and citizens will be watching — not for new promises, but for evidence of delivery. South Africa has reached its turning point and what matters now is execution,” he said.

“The fiscal space to delay, defer or debate without action has run out. Budget 2026 must be the moment the country stops discussing reform and starts delivering it.”