Godongwana Budget 2026 tests South Africa’s economic recovery
The Bottom Line
The finance minister faces his 2026 budget with an improving economic backdrop, but unlocking private sector investment remains the final hurdle.
WHEN Finance Minister Enoch Godongwana delivers his national budget speech this month, he will do so from a position of strength for the first time since taking charge.
Godongwana has not had an easy stint since taking the job in August 2021. He had to find a way forward after the pandemic brought the economy to a standstill. While the global economy went on to make a recovery, the South African economy has doddled along, growing at less than 1% a year.
This stagnant growth weighed on the government’s ability to make ends meet, and Godongwana surprised everyone last year, including his cabinet partners in the Government of National Unity, with an unexpected VAT increase.
In the end, the minister did not have the votes to pass his budget in Parliament. And it took not once, not twice, but three times to get it passed.
This time it’s different. Since he presented his mini-budget in November 2025, there has been talk about an upswing in the economy, propelled by the reduction in the inflation target to 3%, the removal of South Africa from the European Union’s money laundering monitoring “grey list,” and the upgrading of its sovereign credit rating by S&P.
Aside from these events, the country has also made progress in pushing through much-needed structural reforms. The electricity grid is stable, and more privately owned generation capacity has been added. The power sector also received a boost from the electricity regulator Nersa approving the Market Operator licence for the National Transmission Company of South Africa (NTCSA).
In freight logistics, the signing of the long-term concession agreement for Durban Container Terminal Pier 2 has unlocked investment in port capacity and technology. The private sector has also been brought in to operate trains on the freight rail network.
Entry to the country has been simplified through the new Electronic Travel Authorisation system, which allows for digital visa processing and faster approvals. Tourism received a boost from the establishment of the Trusted Tour Operator Scheme, facilitating significant growth in group tourism from China and India.
But even with the economic tide supporting Godongwana, he can’t claim victory just yet.
According to the South African Reserve Bank, non-bank companies are holding R1,8 trillion in bank accounts. So it stands to reason that if businesses were confident, they would likely use these resources to invest and expand.
So far, there are a few signs of this. Gross fixed capital formation — which measures investment in productive assets like machinery, buildings, and infrastructure — declined by 1,7% in the first quarter of 2025, according to Stats SA. However, as this data is a lagging indicator, investment may have increased since its release in September 2025.
Even so, the bottom line is that the economy is clearly out of ICU and is now either in high care or a general ward. For the country to be fully discharged, it must continue pressing ahead with Operation Vulindlela’s reforms and also see Godongwana come up with a set of proposals that will give local businesses the confidence to invest in expansion.
