When Finance Minister Enoch Godongwana delivered the 2026 Budget, he indicated that South Africa had reached “an important turning point in the management of our public finances”, pointing to stabilising debt, a narrowing deficit, and easing borrowing costs as evidence that fiscal consolidation was beginning to take hold.
But beyond the macro-economic framing, the clearest signal of the government’s priorities lies in where the R2.67 trillion allocated for 2026/27 will go – and what has been cut, tightened, or redirected to make that spending possible.
Taken together, the Budget Speech and National Treasury’s consolidated spending plans show a state trying to do three things at once: protect core social spending, shift resources toward growth-supporting infrastructure, and clamp down on waste, fraud, and inefficiency.
A budget still built around redistribution
Treasury’s numbers confirm that the Budget remains strongly redistributive. Consolidated expenditure is projected to rise from R2.58 trillion in 2025/26 to R2.89 trillion by 2028/29, increasing at an average annual rate of 3.9%.
Roughly 60.2% of non-interest spending in 2026/27 is allocated to the social wage – education, healthcare, social protection, and basic services. Within that envelope, basic education, health, and social protection account for 70.3% of social wage spending, supporting 13.6 million schoolchildren, providing healthcare services to 84% of the population, and funding grants for 26.5 million beneficiaries.
Education remains the single largest spending function, taking 23.7% of consolidated expenditure over the medium term. Basic education alone receives R358.6 billion in 2026/27 and rises steadily thereafter. Early childhood development funding is expanded to reach hundreds of thousands more children, and the school nutrition programme continues to feed nearly 10 million learners.
Health allocations also grow, reaching R334.3bn by 2028/29. Provinces receive R26bn to support HIV and AIDS programmes, including prevention of mother-to-child transmission and treatment provision. At the same time, Treasury notes that compensation still consumes the largest share of health spending, meaning efficiency reforms inside the system remain essential.
Social grants remain a central pillar of the spending framework. They total R292.8bn in 2026/27, with modest increases across major grant categories. The old-age, disability, and care-dependency grants rise to R2 400, while the child support grant increases to R580. The Social Relief of Distress grant is extended at current levels.
Spending is rising – but slowly and selectively
Although expenditure increases over the medium term, the pace is restrained. Treasury projects average annual growth of 3.9%, reflecting a deliberate effort to keep overall spending in check while redirecting funds towards priority areas.
Within that constraint, the composition of spending is shifting. Compensation of employees remains the largest category at 32.1% of expenditure, but capital spending – particularly on buildings and infrastructure – is the fastest-growing component. The government expects public-sector infrastructure investment to exceed R1 trillion over the medium term.
Transport, logistics, water and energy dominate that pipeline. Road investment plans alone run into the hundreds of billions, while rail, bulk water systems, and electricity transmission infrastructure are prioritised to support growth and improve service delivery.
Savings funded priorities – not tax hikes
One of the most politically significant moves in this year’s Budget was the withdrawal of a R20bn tax increase that had previously been pencilled in. Godongwana said this decision was made possible by stronger revenue performance and improved expenditure discipline, noting that “the improving fiscal position allows us enough room to withdraw the proposed tax increases, without putting fiscal sustainability or economic activity at risk”.
Gross tax revenue for 2025/26 was revised up by R21.3bn, largely because of higher-than-expected VAT, corporate income tax and dividends tax collections. At the same time, Treasury identified R12bn in “targeted and responsible savings” over the medium term.
Those savings did not come from cuts. They flowed from scaling down an underperforming public transport network grant that failed to generate sufficient ridership, tightening grant verification systems, and adjusting baselines to reflect lower inflation.
According to Godongwana, the funds freed up will be redirected towards priorities such as rail recovery, defence capability, border management, and judicial capacity. In other words, money removed from weak or inefficient programmes is being reallocated to areas the state considers strategic.
Tighter policing of grants and payroll
Where this Budget differs from previous years is in its focus on enforcement.
The Minister of Finance emphasised that savings would come from “closing leakages” and rooting out inefficiencies across programmes. Social grant administration is one of the clearest examples.
Enhanced biometric and income verification systems have already identified nearly 35 000 incorrect or fraudulent grants that have since been terminated. Treasury’s detailed review shows that approximately 6 million bank accounts and 8 million credit bureau records were verified, flagging more than 291 000 beneficiaries for review. As a result, tens of thousands of grants were cancelled or adjusted, generating measurable savings and improving targeting.
The projected savings from improved targeting amount to R2bn in 2026/27 and R1bn in 2027/28. The policy stance is firm: grants remain protected for eligible beneficiaries, but abuse will be confronted directly.
The same logic now applies to the public-sector payroll. A ghost worker audit has identified 4 323 high-risk employees requiring verification. These cases will undergo facial matching against the National Population Register and physical verification checks. The next phase involves payroll reforms and the introduction of a single sign-on system to strengthen automated oversight and reduce irregularities.
Debt stabilisation as the anchor
The broader fiscal framework supports this strategy. The consolidated deficit is projected to narrow to 4% of GDP in 2026/27 and 3.1% by 2028/29. Gross debt is expected to stabilise at about 78.9% of GDP before gradually declining. The main budget primary surplus is forecast to rise steadily to 2.3% of GDP by 2028/29.
These indicators matter because they underpin the credibility Treasury is trying to rebuild. Lower borrowing costs, improved investor confidence, and reduced debt-service pressure depend on sustained fiscal discipline.
