By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
A brief look at high-frequency fiscal numbers ahead of the 2026 Budget
In just under two weeks, the Minister of Finance, Enoch Godongwana, will table the 2026 National Budget in Parliament, the second main budget under the Government of National Unity (GNU). Unlike the first budget, which went through three iterations as political parties sought to find common ground under the newly-formed GNU, we expect this process to be smoother this time, as the budget framework has since matured.
We are encouraged by the broad endorsement of reforms under Operation Vulindlela (OV) Phase 2.0, which has already delivered tangible progress. The successful adoption of the new, and lower, 3% inflation target was also critical, reflecting strong policy coordination between monetary and fiscal authorities. Encouragingly, fiscal data to date suggests that government remains on track to meet its 2025/26 fiscal objectives.
The latest high-frequency revenue data has been mixed but is generally tracking the revised estimates presented in the 2025 Medium-Term Budget Policy Statement (MTBPS). Corporate income tax (CIT) receipts are up 8.8% y/y to R250.7 billion in the fiscal year-to-date (YTD), ahead of the MTBPS full-year estimate of 7.7%. Approximately 73% of the annual CIT target has already been collected and continued strength in commodity prices and solid growth in gross operating surplus across several sectors should help sustain this momentum.
Net value-added tax (VAT) has also outperformed, rising 9.1% y/y fiscal YTD compared to the MTBPS estimate of 7.8% for 2025/26. This partly reflects slower-than-expected growth in VAT refunds, alongside resilient household consumption. Growth in the general fuel levy has been strong at 14.1% fiscal YTD, slightly below the 14.8% MTBPS estimate but still robust. Higher commodity prices supporting GDP growth, alongside improving tourism-related travel activity, should continue to underpin fuel levy collections. Customs duties have increased by 7.1% y/y fiscal YTD, exceeding the 5.0% MTBPS projection.
However, some pressure is evident in personal income tax (PIT) receipts, up 7.2% y/y fiscal YTD, below the MTBPS estimate of 8.5%. This reflects weakness in formal non-agricultural employment, which declined by 1.2% in the calendar YTD, as well as softer-than-expected wage bill growth.
All in, gross tax revenue has increased by 8.6% fiscal YTD, outperforming both the 7.0% growth initially projected in Budget 3.0 and the upwardly revised 8.1% estimate in the MTBPS.
On the expenditure side, spending has remained contained, consistent with government's ongoing fiscal consolidation strategy. Non-interest expenditure has increased by 5.5% y/y fiscal YTD, undershooting the 8.0% MTBPS estimate. While spending growth may edge higher in the remaining three months of the fiscal year, it is unlikely to fully converge to the MTBPS projection. Debt-service costs have risen by 7.6% fiscal YTD, below the 9.2% MTBPS estimate. A stronger rand and lower inflation should help moderate further increases in debt-service costs.
With revenue likely to outperform earlier estimates and expenditure discipline largely maintained, a third consecutive fiscal year of primary surplus appears increasingly likely. Together with a gradual improvement in economic growth, this will be critical in stabilising gross government debt.
Week in review
Mining production (not seasonally adjusted) expanded by 2.5% y/y in December, rebounding from a 2.4% decline in November. Seasonally-adjusted mining output declined by 1.2% m/m, following a 5.4% contraction in November. The largest positive contributors were iron ore and manganese ore, while PGMs and coal were the largest detractors. Overall, mining output declined by 0.5% q/q in 4Q25, underscoring a retreat from the quarterly growth momentum that prevailed in the two consecutive quarters prior to 4Q25. This suggests that the mining sector dragged GDP growth in the final quarter of 2025
Manufacturing output (not seasonally adjusted) declined by 1.4% y/y in December, following a 2.0% decrease in November. Seasonally-adjusted manufacturing production fell by 1.2% m/m, after declining by 2.1% in November. The largest detractors were food and beverages; wood and wood products; paper, publishing and printing; basic iron and steel; non-ferrous metal products and metal products and machinery. The largest positive contributors were petroleum, chemical products, rubber and plastic products. As a result, manufacturing output declined by 0.5% in 4Q25, underscoring a drag on GDP growth in the final quarter of 2025. We expect a modest, yet volatile, rebound in manufacturing production in 2026, supported by continued improvements in domestic demand, easing infrastructure constraints, and a stable global growth environment.
Week ahead
On Tuesday, the Quarterly Labour Force Survey (QLFS) for 4Q25 will be released. In 3Q25, QLFS data showed an increase of 248 000 q/q in total employment, following an increase of 19 236 in the previous quarter. Compared to a year ago, employment improved by 360 000 q/q, bringing total employment to 17 055 000. The level of unemployment declined by 360 000 q/q (3 000 y/y), bringing the total number of unemployment individuals to 8 007 000. As a result, the official unemployment rate fell by 1.3-percentage points (ppts) to 31.9%.
On Wednesday, data on consumer inflation for January will be released. Consumer inflation was recorded at 3.6% y/y in December, up from 3.5% in November. Monthly pressure was 0.2%, mainly driven by rising services costs and higher fuel prices. Core inflation was 0.1% m/m and was 3.3% higher than at the same time in 2024. Food and non-alcoholic beverages (NAB) inflation was unchanged at 4.4% y/y, while fuel prices were up 1.6% m/m and 0.6% y/y. We anticipate that headline inflation will soften to 3.3% in January and 3.1% this year, versus 3.2% in 2025.
Also on Wednesday, retail sales data for December will be available. Retail sales increased by 3.5% y/y in November, up from 3.0% in October. On a month-on-month basis, volume sales increased by 0.6%, slightly lower than the 1.0% recorded previously.
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