On The Deals Shaping Our Economy
Good morning. Ika here. Finance Minister Enoch Godongwana delivered what is being hailed as a masterstroke from the parliamentary lockup.
After years of bracing for the worst, South Africa was handed a pragmatic, pro-growth budget that finally gives the middle class some breathing room.
Here is what you need to know.
🇿🇦 A 17-Year Milestone
For the first time in 17 years, South Africa's debt is set to stabilize, peaking at 78.9% of GDP before falling.
Why it matters: This signals a shift from the stagnant economy and collapsing revenues that have plagued the country's recent history.
The global market is already reacting to the restored credibility:
South Africa has officially been removed from the FATF grey list.
The country secured its first sovereign credit rating upgrade in 16 years.
"These are signals of restored credibility. Of renewed resilience. And of a nation regaining its footing."
✂️ Taxpayer Relief (Finally)
The most immediate surprise was the scrapping of a looming tax hike.
Driving the news: Government officially withdrew the R20 billion in tax increases provisionally tabled last year.
They pulled this off thanks to a major revenue overrun driven by higher-than-expected corporate taxes and VAT.
Bracket creep is dead (for now): After ignoring the progressive tax tables for two years, the government is fully adjusting personal income tax brackets and rebates for inflation.
Medical tax credits are also getting an increase for the first time since 2023.
📈 By the Numbers
Godongwana's strategy relies heavily on ruthless administrative efficiency over dramatic tax grabs.
1.6%: Projected real economic growth for 2026, a solid bump from the sluggish 1.4% previously estimated.
4.5%: The narrowed consolidated budget deficit for 2025/26, dropping to 4% next year.
R12 billion: The amount of "targeted and responsible savings" identified to weed out unproductive government spending.
35,000: The number of incorrect or fraudulent social grants terminated after SASSA upgraded its biometric verification, saving the state R3 billion.
🚀 Small Business & Savings Wins
The government actually listened to a citizen's "Tip for the Budget".
A Gauteng small business owner asked to raise the VAT threshold - and Treasury delivered.
The new limits:
VAT Registration: The compulsory threshold for small businesses leaps from R1 million to R2.3 million.
Tax-Free Investments: The annual limit jumps from R36,000 to R46,000.
Retirement Deductions: The contribution limit rises from R350,000 to R430,000.
Capital Gains: The exemption for older persons selling a small business increases from R1.8 million to R2.7 million.
🍷 The "Sin Tax" Squeeze
It wouldn't be a budget speech without a bump in excise duties, though this year they are strictly in line with inflation:
Cigarettes: Up 77 cents to R23.58 for a 20-pack.
Beer: Up 8 cents per 340ml can.
Spirits: Up R3.20 per bottle.
Fuel: The general fuel levy rises by 9 cents per litre for petrol.
🎤 The Bottom Line
This budget serves as a victory lap for South African Revenue Service (SARS) Commissioner Edward Kieswetter, who steps down in April. His efforts to rebuild the hollowed-out institution helped pay for this year's tax relief.
By focusing on unsexy but vital housekeeping hygiene and infrastructure, the Treasury has managed to pull South Africa back from the fiscal brink without punishing the middle class.
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