Maarten Ackerman, Chief Economist at Citadel, shares insights ahead of the 2026 National Budget Speech.

As South Africa (SA) prepares for the upcoming National Budget, Chief Economist at Citadel, Maarten Ackerman, provides his analysis on what to expect from Finance Minister Enoch Godongwana and the potential impact on the SA economy, inflation and investment opportunities.

A More Stable Economic Landscape Sets the Stage for Budget 2026

“The environment in which this year’s National Budget Speech is being presented is significantly improved compared to 2025,” says Ackerman. “The commodity cycle, especially the strong performance of gold and platinum, has provided a considerable fiscal windfall, creating a more favourable backdrop for this year’s budget.”

Ackerman highlights that SA has also benefited from a stronger rand, helping to reduce import-driven inflation. Bond yields have improved, moving from 11% to below 9% over the past year, lowering government borrowing costs and confidence has improved on the back of positive rating reviews and the country being removed from the grey-list

“We are also seeing early signs of more diversified domestic growth, with notable improvements in energy, logistics and tourism. This should support the budget’s growth assumptions.”

Tax Adjustments on the Horizon, but No Major Changes Expected

Ackerman does not anticipate major tax changes. “Given last year’s political challenges around value-added tax (VAT), it is highly unlikely that the government will revisit a VAT hike,” he explains. “We expect the usual adjustments for bracket creep, but no significant changes to personal or corporate income tax rates. Sin taxes may increase, potentially more aggressively than usual.”

Treasury’s Growth Projections: Realistic or Overly Optimistic?

Treasury’s expected growth rate for 2026 is around 1.4–1.5%, which Ackerman believes is reasonable given the current economic constraints. “These assumptions are more realistic than in the past and align closely with our own projections,” he says.

He remains cautiously optimistic that continued reforms, particularly in energy and logistics, could lift growth toward 2% by the end of the fiscal framework, supporting fiscal consolidation and investment conditions.

Focus on Structural Reforms: Key Investments for SA’s Future

Ackerman notes that investors should focus on structural reforms related to fixed capital formation and private sector investment. “SA’s core challenge remains insufficient investment in critical infrastructure and addressing this is vital for long-term growth,” he explains.

He suggests using a portion of the commodity windfall to introduce targeted incentives, similar to the previous solar tax incentive, aimed at crowding in private investment in energy, logistics and infrastructure.

State-Owned Enterprises: Minister’s Firm Stance Against Further Bailouts

Ackerman expects the finance minister to maintain a firm stance against further bailouts for state-owned enterprises (SOEs). “The Minister has been clear about drawing a line on SOE bailouts, consistent with the fiscal anchor framework,” he says. “Loosening this stance could undermine fiscal credibility.”

Bond Markets: A DELICATE BALANCE

While bond yields have improved, Ackerman cautions against complacency. “Markets have priced in much of the good news. If fiscal assumptions appear overly optimistic, we could see a negative reaction, particularly in bonds,” he says.

The rand, which has strengthened on improved local conditions and fiscal credibility, could face pressure if there are negative surprises. “It also remains vulnerable to global factors, especially movements in the United States (US) dollar,” he notes.

Interest Rate Outlook: Space for Easing

Ackerman anticipates that contained inflation and a stronger rand may give the South African Reserve Bank (SARB) room to cut interest rates further in 2026. “The environment is conducive to gradual policy easing, with the SARB focused on its inflation target,” he explains.

Investors Should Remain Cautious

Despite the improved outlook, Ackerman urges caution. “Much of the positive momentum is already priced into markets. Commodity tailwinds can reverse quickly and sustainable growth depends on continued structural reform,” he says.

He concludes that while the budget is likely to reinforce fiscal stability, investors should remain prudent, particularly if unexpected policy shifts emerge.