R50 billion tax surprise for South Africa
South Africa’s Finance Minister will present the country’s 2026 Medium Term Budget Policy Statement (MTBPS) next week, with some economists expecting a R50 billion tax overrun.
The MTBPS is an important economic update from South Africa’s government, and gives an indication of what it will do in future budgets.
The Parliamentary Monitoring Group (PMG) described the MTBPS as a “mini-budget” and said, “It indicates how the government intends to allocate the upcoming national budget.”
The “mini-budget” provides several important pieces of information, including spending estimates for the first half of the year.
It will also indicate any changes to the proposed revenue and spending estimates for the second half of the year.
One important piece of information in the statement is the country’s tax revenue for the first half of the year, which is expected to exceed previous estimates.
PSG chief economist Johann Els said he expects the tax overrun for the first half of the year to reach R50 billion, possibly higher.
“Tax revenue is running well ahead of expectations, and it is not just mining taxes benefiting from higher precious metals prices,” he said. “The improvement is broad-based, with personal income tax and VAT also holding up well.”
“The tax overrun could reach R50bn or more, which is a significant improvement on the numbers in the February Budget.”
Els said he expects the country’s budget deficit to narrow to approximately 3.5% of GDP, from the 4% anticipated in the February budget.
He also forecast a larger primary budget surplus than expected, at roughly 1.9%, compared to the 1.4% laid out in the year’s budget.
“The primary budget surplus could also be larger than expected – around 1.9%, compared to the 1.4% of the February budget,” he said. “This would help put government debt on a more sustainable path.”
Good news, but a difficult economy
While there are several positives expected from the upcoming MTBPS, Els warned they might not be sustained.
“The better numbers are unlikely to be fully sustained,” he said. “The economic backdrop remains difficult, growth is weak, and some of the revenue boost reflects higher commodity prices.”
South Africa’s GDP growth has been stagnant in recent years, reaching 1.1% at the end of 2025 and contracting in the second quarter of 2026.
Global economies have also struggled in the last year due to high oil prices driven by conflict in the Middle East and the closure of the Strait of Hormuz.
Given these difficulties, Els said the National Treasury is unlikely to allocate the full tax revenue overrun into its forward projections.
“Treasury is unlikely to build the full revenue overrun into its forward projections,” he said. “It will probably remain cautious about how much of the current improvement it carries into future years.”
“This is understandable, given the uncertain economic outlook and pressure for more government spending.”
Els also noted speculation about a reduction in the General Fuel Levy (GFL) to give consumers relief from South Africa’s high current fuel prices.
“There is also uncertainty around a potential further fuel levy relief, but the April to June relief already cost R17 billion,” he said.
Some groups in South Africa have called for another reduction in the GFL after petrol prices exceeded R30 in October 2026, including the South African Automobile Association (AA).
The association said the GFL should be reduced by R3 per litre to provide relief to consumers, similar to the plan adopted by the National Treasury in April 2026.
The group said the government’s lost revenue from cutting this levy could be recovered by cutting waste.
“Year after year, the government has found billions for failing state companies. It can find the money to keep South Africa moving,” the association said.
“We maintain that government can afford to cut the general fuel levy by R3 a litre, which would materially reduce the inflationary impact of fuel price changes.”
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