Ordinary South Africans may find some relief in this year’s national budget, with tax adjustments for salary earners, continued support for social grant recipients and a slower pace of government borrowing offering modest financial breathing room.
However, the broader economic picture remains subdued, with sluggish growth and limited job creation continuing to weigh on the country’s recovery.
According to Enoch Godongwana, government’s borrowing requirement is easing as the deficit narrows, signalling improving fiscal discipline. Yet the economy is projected to expand by just 1.6% this year well below the global average of 3.3% raising concerns about the country’s ability to generate employment and broaden the tax base.
With fewer people working, fewer taxpayers are contributing to state revenue, leaving government reliant on continued borrowing, albeit at lower levels than before.
Spending remains heavily skewed toward social support and essential services. Social grants make up the largest share of expenditure at R446 billion, followed closely by basic education at R445 billion.
Debt servicing remains the third biggest cost to the fiscus. Although repayments have declined, the country still spends about R1.8 billion a day to service its debt a figure that continues to crowd out other priorities.
The South African Police Service will receive a funding boost, while the South African National Defence Force sees no major increase. More than R400 million has been reprioritised to fund Foot-and-Mouth Disease vaccines, and R1.1 billion has been set aside for upcoming local government elections.
For households, the more immediate benefits come through tax relief. Personal income tax brackets and medical tax credits will be fully adjusted for inflation, restoring relief that had been absent for the past two years.
Small business owners are also set to benefit, with the VAT registration threshold raised to R2.3 million in annual turnover, up from the previous R1 million. The change is expected to ease administrative pressure on emerging enterprises.
While the budget delivers targeted relief and tighter fiscal management, economists caution that without faster growth, the country may struggle to turn short-term gains into lasting economic momentum.