National Treasury raised its gross tax revenue estimate for 2026/27 by R17.1 billion in the Medium-Term Budget Policy Statement (MTBPS) tabled in Parliament on 21 October 2026, as stronger corporate income tax, dividends tax, and value-added tax collections improved the fiscal outlook despite weaker expected economic growth.
The revised estimate takes gross tax revenue to R2.144 trillion, from R2.127tn in the February Budget. However, Treasury expects the additional mining tax revenue collected in 2026/27 to be temporary.
The increase forms part of a broader R54.1bn upward revision to main Budget revenue. The other components are R21.1bn in additional non-tax revenue, including R14.3bn in departmental receipts and about R6.8bn more from mineral and petroleum royalties, and R16bn in National Revenue Fund receipts.
Treasury said the additional revenue would support infrastructure projects approved through the Budget Facility for Infrastructure, alleviate spending pressures, increase the Contingency Reserve, and partly contain growth in debt-service costs and reduce the debt-to-GDP ratio.
The R17.1bn net increase in gross tax revenue masks much larger movements among individual tax categories. Treasury raised the corporate income tax estimate by R34.2bn, net VAT by R12.6bn, dividends tax by R5.5bn, personal income tax by R1.5bn, and customs duties by R3.9bn. These gains were substantially offset by a R30.9bn reduction in expected fuel-levy collections and a R10.6bn decrease in the “other” tax category, mainly because of the repeal of the electricity generation levy.
Temporary relief from higher fuel costs
One immediate household-facing measure is the temporary relief in the fuel levy.
The fuel levy will be reduced by R3 a litre for diesel and R1.50 a litre for petrol from 4 November to 1 December 2026. Thereafter, until 5 January 2027, the reductions will be R1.50 a litre for diesel and R1 a litre for petrol.
Treasury puts the fiscal cost at R10bn in foregone revenue. The relief will be funded by returning the R10bn previously transferred to the Central Energy Fund to the National Revenue Fund and placing an equivalent amount in the Contingency Reserve. The MTBPS includes the returned payment in its upward revision to non-tax revenue.
Finance Minister Enoch Godongwana said the measure was intended to ease cost-of-living pressures without compromising the sustainability of the Budget. National Treasury director-general Duncan Pieterse told a media briefing that future relief would depend on whether it could be provided without compromising fiscal targets.
Stronger company tax drives the improvement
Corporate income tax provided the largest uplift to the revised tax estimate. Provisional collections increased by 17.4% in the first half of 2026/27 compared with the corresponding period a year earlier, reflecting broad-based growth.
Mining was the largest contributor. Collections in June were R10.9bn higher than in June 2025 because of high platinum-group metals and gold prices. Treasury said strong corporate profitability also supported dividends tax collections.
Personal income tax benefited mainly from salary increases in the finance and public sectors despite lower employment. Resilient household consumption and lower VAT refunds supported domestic VAT, offsetting weaker import VAT collections.
Although the additional mining tax revenue in 2026/27 is expected to be temporary, export commodity prices remain relatively high, and the outlook for corporate profitability is expected to support collections. Gross tax revenue is projected to exceed the February estimates by a cumulative R60.9bn in 2027/28 and 2028/29.
Collections ahead of the February estimate
In a statement following the MTBPS, the South African Revenue Service said it collected R992.2bn in net revenue in the six months to the end of September. This comprised R1.231tn in gross collections and R239.1bn in refunds.
Net revenue was R15.5bn, or 1.6%, above the February Budget estimate and R67.4bn, or 7.3%, higher than in the corresponding period last year. SARS attributed the performance to stronger corporate income tax, domestic VAT, and pay-as-you-earn collections, together with lower-than-estimated VAT refunds.
The result came as National Treasury lowered its real GDP growth forecast for 2026 from 1.6% to 1.2%. Growth is forecast to reach 1.6% in 2027, 1.8% in 2028, and 2% in 2029.
SARS Commissioner Johnstone Makhubu said sustainable revenue growth would depend on economic expansion, investment, job creation, and broad-based compliance.
SARS said its first-half compliance interventions produced R76.3bn in direct cash collections and prevented an estimated R61.3bn in revenue leakage. Only the first amount represents cash collected; the second is SARS’s estimate of revenue that would otherwise have been lost.
SARS’s revised estimate puts second-half revenue at R1.15tn, R1.6bn higher than previously forecast. The revenue authority expects second-half collections to be R66.3bn, or 6.1%, higher than in the second half of 2025/26, led by PAYE, corporate income tax, and domestic VAT.
Changes underlying the net revision include an R11.7bn increase in expected corporate income tax, including interest, a R2.5bn increase in domestic VAT, and a R2.2bn increase in customs duties.
Additional revenue supports spending priorities
Main Budget non-interest expenditure for 2026/27 has been revised upward by a net R45.5bn. The adjustment combines R55.2bn in additions with R9.7bn in projected underspending, declared unspent funds, and a local-government repayment to the National Revenue Fund.
A R20bn provisional allocation has been made for infrastructure projects under evaluation by the Budget Facility for Infrastructure. Funding decisions will depend on projects successfully completing National Treasury’s assessment process.
Other additions include R6.2bn for unforeseeable and unavoidable expenditure, mainly disaster relief and rehabilitation, R4.3bn in self-financing expenditure, and R1.9bn in rollovers.
The proposed Special Appropriation Bill provides R6.9bn across several purposes, mainly for SARS. Funding for the revenue authority is intended to accelerate modernisation, upgrade ICT infrastructure, improve system availability, and strengthen cyber resilience.
Over the next two years, main Budget non-interest expenditure is expected to be a net R45.7bn higher than forecast in February. Treasury says the increase will be funded by higher projected tax revenue and will support health and education, strengthen local government, improve regulatory enforcement, and provide additional capacity to institutions in the justice sector.
Payments for capital assets are projected to grow by an annual average of 5.3% over the medium term, compared with 3.6% growth in consolidated expenditure. Debt-service costs are expected to increase by an annual average of 4.9%.
Savings reprioritised across the Budget
Treasury says work in four areas has yielded R38.1bn in medium-term savings: R13.1bn from improved social-grant administration and verification, R11.7bn from efficiencies in national departments, R7.8bn from pausing the human settlements development grant while its delivery model is redesigned, and R5.5bn to be recovered from public-entity cash surpluses in 2027/28. The amounts have been reprioritised across the fiscal framework.
These amounts do not all represent cash already received. They include savings from improved administration, efficiencies, and programme changes over the medium term, as well as the planned recovery of public-entity surpluses in 2027/28.
SRD grant extended while legal challenge creates risk
The government has extended the Social Relief of Distress (SRD) grant for another year while it considers the grant’s longer-term purpose and design. Work will continue to integrate the grant with labour-market activation, skills development, and enterprise-support interventions. Beneficiaries will be linked to employment, training, and business opportunities through MzansiXchange.
In its social-development projections, Treasury says stronger verification is expected to reduce the number of social-grant beneficiaries from 17.8 million in 2026/27 to 17.1 million by 2029/30, generating R6.2bn in savings. The MTBPS does not explain how this amount relates to the R13.1bn in social-grant administration and verification savings included in the wider R38.1bn programme, so the two figures should not be added together.
Treasury says the R6.2bn will be reprioritised towards preventing gender-based violence and femicide and supporting health interventions to combat child malnutrition and stunting. Related medium-term allocations include R3.8bn to appoint 3 552 social workers and R1.6bn for nutrition support for pregnant women and young children.
The litigation over the SRD regulations could increase expenditure and undermine the expected grant savings. In January 2025, the High Court found provisions concerning the means-test threshold, grant value, definition of income, and income-verification arrangements invalid. The government appealed, and the Supreme Court of Appeal heard the matter in August 2026, but judgment was pending when the MTBPS was prepared.
Treasury’s preliminary estimates indicate that upholding the High Court judgment could add three million to 13 million eligible beneficiaries and increase the annual funding requirement from about R36bn to R74bn.
Debt declines, but remains on a higher path
Gross loan debt stabilised at 78.4% of GDP in 2025/26, below the 78.9% forecast in the February Budget, partly because nominal GDP was higher than expected. However, Treasury’s revised forecasts put the debt-to-GDP ratio on a higher path than previously anticipated, even though it is projected to decline to 76.6% by 2029/30.
The rand value of gross loan debt will continue to rise, from R6.35tn in 2026/27 to R7.24tn in 2029/30. The declining ratio therefore does not mean the stock of government debt is shrinking.
Debt-service costs are projected at R441.5bn in 2026/27, equivalent to about R1.2bn a day and R9bn more than forecast in February. They are expected to rise to R509.3bn in 2029/30. Over the medium term, the government will spend more on debt-service costs than it will spend on any one of health, social development, or basic education.
The main Budget deficit is projected to narrow from R301.6bn, or 3.7% of GDP, in 2026/27 to R233.6bn, or 2.5% of GDP, in 2029/30. Over the same period, the main Budget primary surplus, where revenue exceeds non-interest expenditure, is expected to increase from 1.7% to 2.9% of GDP.
Although the deficit narrows, increasing debt redemptions are expected to raise the gross borrowing requirement from R434.2bn in 2026/27 to R586.2bn in 2029/30. Treasury plans to use bond buybacks and other liability-management measures to reduce concentrations in the redemption profile.
Johann Els, chief economist at PSG Financial Services, described the MTBPS as market-friendly, investor-friendly, and supportive of South Africa’s sovereign credit ratings. He said directing a substantial portion of the additional revenue towards infrastructure should support future economic growth, while the introduction of bond buybacks would give Treasury more flexibility in managing its debt.
Els said the continued primary surpluses and gradual reduction in the deficit and debt ratios were positive for debt sustainability. He expects the fiscal trajectory to support possible ratings upgrades by S&P and Moody’s, although he said one of the agencies might wait until after the February 2027 Budget.
