BY: TANA MALINGA
South Africa’s business community received a measured and reassuring message following the 2026 National Budget Speech delivered by Finance Minister Enoch Godongwana. Against a backdrop of improving fiscal credibility and a cautious economic recovery, government has opted for stability over shock measures. Instead of sweeping tax increases, the focus has shifted to strengthening public finances, easing pressure on small and medium enterprises (SMEs), and accelerating infrastructure-led growth.
For business owners, the overarching theme is predictability. The Budget outlines targeted relief for SMEs, renewed investment in energy and logistics, and structural reforms aimed at lowering long-term operating costs while stimulating sustainable growth.
CAPITAL GAINS TAX RELIEF SUPPORTS SME SUCCESSION AND RETIREMENT
A significant boost has been introduced for small business owners planning retirement or succession. The Capital Gains Tax (CGT) exemption on the sale of a small business increases from R1.8 million to R2.7 million for owners aged 55 and older, or those selling due to ill health. In addition, the qualifying business value threshold rises from R10 million to R15 million.
This reform enhances after-tax proceeds for entrepreneurs, strengthens retirement planning, and facilitates smoother intergenerational transfers, reinforcing long-term wealth preservation within the SME sector.
VAT THRESHOLD INCREASE DELIVERS ADMINISTRATIVE AND CASH FLOW RELIEF
In a major win for small enterprises, the VAT registration threshold has been raised to R2.3 million. Businesses with annual turnover between R1 million and R2.3 million now have the option to deregister.
This adjustment reduces compliance burdens, limits audit exposure, and cuts administrative costs. Importantly, it also improves cash flow management, as qualifying businesses will no longer need to charge VAT on invoices or remit regular VAT payments to SARS. The result is enhanced price competitiveness and simplified financial management for thousands of small firms.
FISCAL CONSOLIDATION GAINS MOMENTUM
From a macroeconomic perspective, the fiscal outlook is steadily improving. Economic growth is projected at 1.6% in 2026, rising to 2% by 2028. While structural challenges, including logistics bottlenecks, infrastructure weaknesses, and agricultural disease outbreaks, continue to constrain productivity, the overall trajectory reflects gradual recovery.
Public debt is stabilising for the first time in 17 years at 78.9% of GDP in 2025/26, with a downward trend expected thereafter. The budget deficit is projected to narrow to 4% in 2026/27 and further to 3.1% by 2028. A strengthening primary surplus signals improving fiscal sustainability and reinforces investor confidence.
PAYMENTS ECOSYSTEM MODERNISATION DRIVES DIGITAL EFFICIENCY
The rollout of the Payments Ecosystem Modernisation (PEM), including the launch of PayInc as shared digital payments infrastructure, marks a significant advancement in financial system integration.
For fintech firms and financial service providers, this development enables seamless integration, accelerates innovation in digital payments, and is expected to reduce transaction costs over time. The broader impact includes enhanced competition, improved operational efficiency, and a better customer experience across the financial services landscape.
RISING INPUT COSTS REQUIRE STRATEGIC ADJUSTMENT
Despite positive reforms, operating pressures remain. Fuel levies, carbon taxes, Road Accident Fund levies, and excise duties have increased in line with inflation. These adjustments will particularly affect transport, logistics, delivery services, agriculture, taxis, and manufacturing.
Higher fuel and input costs may filter through to food prices, raw materials, and distribution services. To protect margins, businesses may need to implement prudent pricing strategies, optimise supply chains, and enhance operational efficiency.
INFRASTRUCTURE INVESTMENT AND PPPs CREATE NEW OPPORTUNITIES
Government is accelerating infrastructure investment and expanding public-private partnerships (PPPs), opening fresh avenues for SME participation.
Opportunities are expected across construction, maintenance, ICT, energy, and logistics through subcontracting and service provision.
Improved infrastructure delivery should strengthen energy reliability, reduce logistics delays, and enhance market access, directly supporting franchise operations, agri-enterprises, and owner-managed businesses structured as formal entities.
A CLEAR PRO-BUSINESS POLICY DIRECTION
Overall, the 2026 Budget sends a strong message of fiscal discipline and strategic support for business. With public debt stabilising, broad tax increases avoided, and targeted SME relief implemented, government has prioritised certainty and reform over disruption.
While inflation-linked cost pressures remain, the policy direction is firmly pro-investment and pro-growth. Through infrastructure expansion, digital payments modernisation, and structural reforms, the operating environment is becoming more predictable, enabling businesses to plan with greater confidence, invest strategically, and position themselves for sustainable expansion.
