South Africa is at a “turning point”, with encouraging signs of stabilisation, although challenges still persist, and this is reflected in the 2026 Budget delivered on February 25.

This was indicated by accounting firm PKF South Africa tax specialist Paul Gering, speaking at the company’s 2026 Post-Budget Analysis session on February 26.

He highlighted that the country was on a “positive tide” currently.

A record gold price, along with the strengthening of the rand and the weakening of the dollar, bolstered the economy to the extent that the additional R20-billion of tax revenue previously targeted was not required, and the country was able to post a “strong Budget” this year, Gering averred.

He highlighted other positives in the country as including accountability on corruption, pullbacks on US tariffs, the removal from the Financial Action Task Force grey list, among others.

The Budget speech revealed higher-than-expected net value-added tax (VAT), corporate income tax and dividends tax collection, which improved the in-year outlook.

Therefore, governmental elected to withdraw the R20-billion tax increase provisionally included in the May 2025 Budget.

Savings of R12-billion over the medium term were identified through unproductive expenditure, closing leakages and tackling inefficiencies.

Finance Minister Enoch Godongwana reduced the country’s inflation to 3%, the first time in a quarter of a century that government has changed the target.

Despite the positive tide in the country, there are issues, such as the considerable problem of job creation, with a need for clarity on the Youth Employment Service programme and the Unemployment Insurance Fund jobs creation fund, Gering pointed out.

Presenting a summary of the revenue sources, he said the significant impact of individual taxes in financing this revenue was evident, with VAT “ultimately an individual liability”; however, some stability in other taxes was starting to improve.

“. . . I think we all expected no fundamental change [in this year’s Budget], but we got a lot of change. We got a lot of things that we didn’t really expect in a Budget that is just there when we are starting to turn the corner – a brave Budget.”

Some of these changes include an unanticipated inflationary increase in the medical tax credit, the first time in three years.

Gering highlighted a big change as the annual discretionary allowance increasing from R1-million to R2-million, allowing more freedom for people to take funds offshore at a time when the rand is strong.

He also pointed out a very important focus on savings, with a significant increase from R36 000 to R46 000 in the tax-free savings limit.

The retirement fund contribution for next year, allowing an increase, was also noted as an important development.

Gering highlighted that the travel reimbursement rate and the car allowance rate had a positive change, notwithstanding the lowest petrol price for several years. He lauded this as a positive change coming through that gives something back to the middle class.

Gering pointed out that while the fuel taxes had gone up, this was not as significant as anticipated.

He also said that while there were changes in the sin taxes, and while these were bound by the same problem as a VAT increase, these would not be fought to the same extent.

Looking ahead, a super penalising carbon tax would come in the future, which would require attention.

Gering said the illicit economy remained a major problem for the country, costing the economy about R16-billion a year, and hampering legitimate cigarette producers in the country and jobs.

“I wrote this in an open letter to the Minister. He is addressing it, but I think it’s being addressed too slowly.”

Managing the issue of low-value goods coming in and distorting the market owing to no customs VAT is another issue. While the impact of this is understood, the South African Revenue Service system is taking too long to fix it, Gering warned.

He indicated that lifestyle audits would become part of reality for high-net-worth individuals, set to assess their assets and movements of these.

“Verifications are increasing on trusts. Before, trust returns were a relatively simple process. Now, if you’ve got a property with rental, that's the initial focus. Later, other trust streams of income will become a focus,” Gering averred.

He also indicated that crypto transactions would have to start being disclosed, as of March 1.

There will also be some form of online gambling tax or gambling tax in the future, and companies will need to prepare for this – either at the proposed 20% rate or below this.