Finance Minister Enoch Godongwana maintains that the power to raise VAT is essential to good fiscal management during the 2026 Budget Speech in Parliament, as the government projects real economic growth of 1.6 per cent for the year.
Pivotal 2026 Budget Speech and the Push for VAT Powers
As South Africa navigated a crucial juncture in its fiscal strategy, Finance Minister Enoch Godongwana tabled a series of core financial documents before Parliament, including the 2026 Division of Revenue Bill, the 2026 Appropriation Bill, the 2025/26 Special Appropriation Bill, the 2026 Estimates of National Expenditure, and the 2026 Budget Review. This marked Godongwana’s second budget for the Government of National Unity, arriving in the wake of last year’s historic postponement following fierce opposition against a proposed value-added tax increase.
Despite that previous friction, Godongwana maintained that the power to raise VAT is essential to good fiscal management. According to Godongwana’s stance on taxation authority, the power is fundamental to effective governance.
Economic Outlook and Fiscal Strategy Improvements
Reflecting on the broader economic landscape, the National Treasury pointed to tangible improvements after years of severe public finance constraints. Five years ago, state capture had hollowed out institutions, South Africa had been downgraded to junk status by the last of the three major credit rating agencies in 2020, and the Financial Action Task Force had grey-listed the country in 2023. Today, the administration highlighted restored national credibility, noting that South Africa has been removed from the grey list and secured its first credit rating upgrade in 16 years.
On the global front, the international economy is projected to grow by 3.3 per cent in 2026. Domestically, the National Treasury projects real economic growth of 1.6 per cent, improving upon the 1.4 per cent estimated for 2025, with medium-term growth expected to average 1.8 per cent and reach 2 per cent by 2028. Meanwhile, the consolidated budget deficit has narrowed to 4.5 per cent of gross domestic product for 2025/26, down from the previously estimated 4.8 per cent, with projections dropping further to 4 per cent in 2026/27 and 3.1 per cent the following year.
Opposition Parties Press for Social Grants and Relief
Political parties and civil society organizations voiced sharp demands ahead of the address, pressing the administration to translate macroeconomic gains into direct relief for citizens facing high unemployment and poverty. GOOD Party Secretary-General Brett Herron criticized the government for delaying long-promised basic income support.
“It has been many years of promises to the poorest among us regarding this, and both the president and minister of Finance have consistently kicked the can down the road.”
Brett Herron, Secretary-General of the GOOD Party
Other political figures raised distinct fiscal demands. ActionSA MP Alan Beesley insisted that the fiscus must avoid new tax hikes and instead focus on institutional reform and illicit market crackdowns, pointing out that illicit trade in alcohol and tobacco costs the fiscus an estimated R30 to R50 billion per year in lost tax revenue. Build One South Africa spokesperson Roger Solomons urged the minister to cut VIP protection spending to fund education, while ACDP Chief Whip Steve Swart anticipated a tax windfall from surging gold and Platinum Group Metals prices and improved tax collection exceeding projections by about R19 billion.
Labor and Civil Society Demands on Unemployment and Growth
Labor leadership emphasized that any credible financial plan must confront the country’s severe socioeconomic hurdles. Cosatu parliamentary coordinator Matthew Parks argued that the budget must address structural poverty and high unemployment.
“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 and inequality, and endemic crime and corruption.”
Matthew Parks, Parliamentary Coordinator for Cosatu
Parks added that a comprehensive stimulus package involving the fiscus, developmental finance institutions, and private banks is urgently required to accelerate industrialization and expand local procurement through tax incentives and rebates.
Weighing Credibility Against Fiscal Pressure
The tension between Treasury’s push for administrative tax flexibility and the public’s demand for relief highlights the delicate balancing act facing the Government of National Unity. While the state celebrates declining debt-service costs and a narrowing deficit, watchdog bodies like the Organisation Undoing Tax Abuse argue that ongoing economic strain must be met through spending reform rather than higher taxes.
