Economist Warns Godongwana’s ‘Turning Point’ Budget Won’t Ease Cost of Living

Cape Town – Finance Minister Enoch Godongwana has hailed the 2026 national budget as “a turning point” for South Africa’s economy, pointing to stabilised debt levels and signs of growth ahead. However, some economists argue that while these steps look good on paper, they fall short when it comes to helping ordinary people cope with the high cost of everyday living, like food, fuel, and bills.

Godongwana’s View of a Brighter Future

In his speech to Parliament, Godongwana painted a picture of progress after years of tough choices. He said the country has turned a corner thanks to strict spending controls and key changes in areas like energy and transport. These moves have helped steady the ship, with public debt now expected to peak at 75.3% of the economy’s size this year before starting to drop. This means less money wasted on paying interest, freeing up cash for things like schools, hospitals, and roads.

The minister highlighted how global events, like higher prices for metals South Africa exports, have boosted government income. He also noted positive steps such as the country being taken off an international watchlist for financial risks and getting its first credit rating boost in over 15 years. These wins, he explained, lower borrowing costs and create room for the economy to expand. On the home front, he forecasted that the economy would grow by 1.6% this year, up slightly from last year’s estimate, and average 1.8% over the next few years, reaching 2% by 2028.

Godongwana stressed that the budget sticks to a plan built on three main ideas: keeping debt in check, putting money into big projects like infrastructure, and spending smarter overall. He said the budget gap for this year has shrunk to 4.5% of the economy, better than expected, and will keep getting smaller. By 2028, debt costs as a share of spending should fall, allowing more focus on helping people and building the nation.

Economists Question the Real Impact on Daily Life

Not everyone shares the minister’s upbeat tone. One economist has warned that the budget does little to tackle the squeeze on household budgets from rising prices. Despite the talk of turning points, everyday costs like groceries, electricity, and transport remain high, and the changes announced might not bring quick relief. This view echoes wider concerns about a deepening cost-of-living crisis, where many South Africans struggle to make ends meet even as the bigger economic picture improves.

For instance, bracket creep – where inflation pushes people into higher tax bands without real wage gains – has been a silent burden. While the budget adjusts personal income tax brackets to offset this, critics say it’s not enough to counter years of no adjustments. Economists like Xhanti Payi have pointed out that while there might be some tax breaks, controversial areas like state-owned companies and defence spending could still drain resources. Others are split on whether this truly marks a shift, with some seeing it as more of the same austerity that hits the poor hardest.

Mixed reactions highlight a divide: some praise the fiscal discipline for setting up long-term gains, but others worry it ignores immediate pains. In public feedback, many feel the budget favours the well-off, leaving low-income families to battle higher living expenses without much support. This scepticism stems from ongoing issues like logistics bottlenecks, weak infrastructure, and disease outbreaks in farming that keep pushing up prices.

Key Highlights from the 2026 Budget

The budget brings a mix of relief and hikes that affect everyone. On the positive side, there are no big new tax increases, and personal tax brackets have been tweaked to avoid bracket creep, putting a bit more money back in people’s pockets. Social grants are getting a boost: the old age grant rises by R100 in two steps, child support by R20, and other grants like foster care and disability by R50 to R100. This aims to help over 19 million recipients keep up with inflation.

However, not all news is good. The Social Relief of Distress grant, often called the R350 grant, stays the same without an increase, disappointing those relying on it amid high unemployment. Fuel prices will go up with the general levy increasing by 9 cents per litre for petrol and 8 cents for diesel, plus carbon fuel levies adding another 5 to 6 cents. Sin taxes on alcohol and tobacco are also rising: beer up by 14 cents a can, wine by 28 cents a bottle, and cigarettes by 97 cents a pack. These changes could add to the cost of living for many.

Government spending totals R2.67 trillion next year, with most going to education, health, and social protection – making up over 70% of the social wage. There’s also money for infrastructure, like roads and water systems, and support for industries hit hard by global shifts. Godongwana scrapped plans for extra taxes worth R20 billion after better-than-expected revenue from mining and consumer spending.

How the Budget Affects Households and the Economy

For families, the budget offers some breathing room through grant increases and tax relief, but the fuel and sin tax hikes could wipe out those gains quickly. With inflation cooling to around 3.5%, things might feel a tad easier, but persistent problems like power cuts and transport woes keep costs elevated. Economists warn that without faster job creation and wage growth, the cost-of-living pinch will continue, especially for the unemployed and low earners.

On a broader scale, the budget signals stability that could attract investors and lower borrowing rates. Reforms in energy and logistics are accelerating, and lower debt peaks mean less risk of financial crises. Yet, risks remain: global slowdowns, local outbreaks like foot-and-mouth disease, and weak public services could derail progress. The primary surplus – where income beats non-debt spending – is seen at 1% of the economy, a sign of better control.

Looking Ahead: Challenges and Opportunities

Godongwana’s speech warns of tough roads ahead but insists the foundation is solid for growth. With elections looming, there’s pressure to deliver on promises without overspending. A new fiscal rule next year could lock in these gains, ensuring debt stays manageable.

Economists urge caution, saying true relief for cost of living needs more than budget tweaks – it requires jobs, affordable basics, and efficient services. For now, while the budget marks steps forward, many South Africans may not feel the turn yet in their daily lives. This ongoing debate underscores the need for policies that balance big-picture fixes with immediate help for those struggling most.

🔴Central News Special Edition | Issue 129: Download the Latest Print and E-Edition | Ngwathe Citizen Forum: Council Now Would Undermine Progress🔴

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