South Africa’s 2026 budget has been warmly received by virtually all stakeholders. But the real test for the country now lies in implementation — an area it has historically fallen flat.
The budget presented on Wednesday, 25 February, by Finance Minister Enoch Godongwana struck the right note with analysts and economists.
Overperformance in revenue by the South African Revenue Service (SARS), along with tighter government spending, has restored some confidence in the country’s fundamentals.
According to Business Leadership South Africa (BLSA) CEO, Busi Mavuso, the budget showed that South Africa’s fiscal position is clearly on an improving trajectory.
Government is on track to deliver a primary surplus for the third consecutive year, meaning revenue exceeds non-interest spending; the debt-to-GDP ratio is stabilising and beginning to decline; and tax collection performance remains strong, with SARS exceeding revenue targets.
“This matters. It is what enabled the S&P credit upgrade, what drives lower borrowing costs, and what gives investors confidence that South Africa won’t face a fiscal crisis,” she said.
“The macroeconomic stability this creates is the foundation for everything else.”
One of the key highlights of the budget was the outlook on infrastructure spending. The three-year medium-term expenditure framework projects public infrastructure investment of over R1 trillion, with approximately R340 billion allocated for the current fiscal year.
More significantly, Treasury expects this year to show the first increase in infrastructure spending in several years, reversing a decade of decline that saw public sector investment fall from nearly 10% of GDP to below 5%.
However, Mavuso warned that the positive trajectory hinges on many “ifs” to actually work.
“The test now is implementation. Budget allocations mean nothing without effective project execution, proper contract management, and value for money,” she said.
“If the public sector can demonstrate reliable execution on the R340 billion allocated this year, if SOEs can deliver on their infrastructure mandates, if municipalities can show improvement in maintenance and basic service delivery, private sector investment will follow.”
If everything goes according to plan, “this year could be the one where the trend turns decisively,” she said.
South Africa’s history of implementation is poor
Mavuso’s warning echoes those of other groups, such as ratings agencies and international financiers like the IMF.
In various assessments of South Africa’s economic trajectory and government policies, these groups have often noted that the country says the right things but falls short in implementation.
Despite the last six months of positive sentiment and policy reforms yielding results, these groups remain cautious about South Africa’s road ahead.
In February, the IMF warned specifically that lagging policy reforms are holding the country back.
“Risks are tilted to the downside, mainly stemming from global fragmentation, trade tensions, and domestic reform fatigue.”
The slow pace of reforms has entrenched structural impediments that constrain potential growth and employment, it added.
To turn the picture around, South Africa will have to implement reforms a lot faster, while hoping for stronger global growth.
The IMF emphasised the need for well-coordinated policies and reforms to safeguard fiscal sustainability, secure low and stable inflation, ensure financial stability, and achieve higher and inclusive growth.
The ratings agencies have a similar view, noting that, despite the budget’s upbeat tone, economic realities such as low growth, high unemployment, and slow reforms remain an impediment to real investor interest.
Despite this, Mavuso said there is room for optimism.
“If 2026 can be the turning point year where public and private infrastructure investment both accelerate, we’ll move meaningfully closer to the sustained growth needed to tackle unemployment,” she said.
“The budget provides reason for cautious optimism that this is achievable.”
