This year’s budget confirms that the South African state has chosen austerity, liberalisation, capital, and investor-friendly policymaking over the lives and dignity of the working class and poor. The National Treasury celebrates fiscal discipline and macroeconomic stability, whilst the lived reality of the majority is of abject poverty, mass unemployment, hunger, and the continued collapse of the public services as a result of decades of austerity measures.
We are being told that the rand is strong, we have increased revenue collection and made minor adjustments to departmental budgets. These indicators stand in contradiction to the social reality of the working class. More than two-thirds of people live in poverty, unemployment has reached 41.9%, and public hospitals, schools, and municipalities are collapsing due to years of budget cuts. A budget that boasts surpluses while people starve is not progress.
As always, the budget references commitments to development and minor increases to service delivery, but this budget offers no strategy to deal with mass unemployment or structural poverty. Instead, it entrenches a decades-old austerity program. The main budget non-interest expenditure will be reduced by 1% in real terms between 2025/26 and 2026/27, further reducing the state’s ability to meet basic social needs. This is not a fiscal necessity; it is a political choice. It is a continuation of the existing unequal and exploitative economic structure.
Growth, Debt, Tax Cuts, and the False Promise of the Primary Surplus
The government’s fiscal strategy of a primary budget surplus is aimed at reducing the rising public debt. We are told that debt-service costs will overtake spending on health, education, and social protection, and therefore, we need to cut public spending. The approach of fiscal consolidation has imposed austerity on working-class and poor communities.
The strategy has failed. Years of spending cuts and the hollowing out of public services have led to debt-service costs continuing to rise as a share of expenditure. Debt-service costs as a percentage of the main budget non-interest expenditure increase from 15.35% in 2022/23 to 18.15% in 2026/27. Austerity has not reduced the debt burden. Instead, it has locked the economy into stagnation, undermined state capacity, and intensified unemployment, inequality, and poverty.
Now that a small amount of fiscal space has been created through cuts, it is evident that social and developmental spending were never the objective of this fiscal strategy. A R28.8 billion revenue windfall in 2025/26 has been channelled towards tax relief for high-income earners through inflationary adjustments to tax brackets, medical aid tax credits that mainly benefit the wealthy, and other regressive tax measures. At the same time, proposed progressive tax interventions that would have raised R57.2 billion over the medium term have been withdrawn.
This shows clearly whose class interest the government acts in. While medical aid scheme members receive tax credits of up to R375 per month, the R370 Social Relief of Distress grant is not increased and has consequently been eroded by inflation. The needs of the poor are sacrificed so that the incomes and assets of the middle and upper classes can be protected. Redistribution flows upward, not downward, in line with the nature of trickle-down economics
The Minister says we have low levels of savings and investment, but ignores the fact that the banking and financial sector is sitting on trillions of rands of idle capital. This wealth can be mobilised for productive investment. Instead, the state continues to rely on incentives that further entrench inequality, including increased limits on tax-free savings and retirement fund deductions. Measures such as raising the VAT registration threshold and expanding capital gains tax exemptions will benefit business owners and asset holders, with no benefit to the unemployed and the working poor.
This approach is not new. It is a long-standing Treasury orthodoxy, in which budget surpluses and revenue windfalls are directed towards tax cuts for corporations and higher-income groups, rather than towards meeting basic social needs or transforming the economy.
Economic transformation must be prioritised over fiscal surpluses. South Africa urgently needs large-scale public investment in public services, social protection, and economic and social infrastructure. Productive public investment is effective if we want to stimulate growth, expand employment, and ease the debt burden. Chasing a primary surplus in the context of mass unemployment and deep poverty is economically irrational and socially destructive.
The government’s growth projections are inadequate. Optimistic scenarios have anticipated growth of only 2% by 2028—far below what is required to reduce unemployment. The World Bank confirms that South Africa needs sustained growth of at least 3% address the unemployment crisis. Anything less condemns millions to permanent exclusion.
A break with austerity is not only possible; it is necessary. What is required is a fundamentally different fiscal strategy—one that places jobs, public services, and social justice ahead of the interests of capital and the pursuit of fiscal discipline.
Jobs, Public Employment and Industrialisation
South Africa is in the grip of a deep structural unemployment crisis. Today, the unemployment rate is now four times higher than the National Development Plan’s target for 2030 and 10 percentage points higher than it was a decade ago. Unemployment is the primary driver of poverty, hunger, inequality and social breakdown. Any assessment of the budget or economic policy that does not place job creation at its centre is an abdication of responsibility.
Despite this reality, the government continues to rely on misleading statistics and short-term interventions instead of committing to a bold programme of public employment and industrialisation. In the State of the Nation Address, President Ramaphosa claimed that 2.5 million work opportunities were created through the Presidential Employment Stimulus (PES). This figure is used to create the illusion of progress while concealing the reality of mass joblessness.
The PES does not create real jobs. The vast majority of these jobs are temporary, insecure, and poorly paid, offering no long-term income security, no career path, and no meaningful protection for workers. In 2025, only 195,481 work opportunities were provided under the programme, and once placements end, workers are pushed straight back into unemployment. This revolving-door approach treats working-class people as disposable and uses short-term relief to mask the failure of economic policy.
Even this inadequate programme is undermined by austerity. Between 2021 and 2026, government funding for the PES has been cut by two-thirds. While an additional R4.08 billion is allocated to the PES in 2026/27, this funding is not new money for job creation; it is reallocated from other budget line items, deepening cuts elsewhere. This results in social needs competing with one another rather than expanding public investment.
If the government were to be serious about addressing unemployment, then it would commit to implementing a large-scale, permanent public employment programme, linked to a state-led industrialisation strategy. We need decent, unionised, and permanent jobs to be created in infrastructure, healthcare, education, environmental rehabilitation, public transport, and community services.
The government continues to defer to the private sector for job creation, despite decades of evidence that South Africa’s capital-intensive and highly financialised economy is structurally incapable of generating employment at the scale our people need. This faith in private capital has repeatedly failed. Unemployment, poverty, and inequality continue to deepen, while productive capacity is hollowed out and communities deal with the social costs.
The reality is that the state is the single largest employer in the country. The government must embrace a state-led development path. What is required is an industrialisation agenda focused on mass employment, localisation, and climate justice, one that places human need, not profit, at the centre of economic policy. The reliance on policies based on comparative advantage and export-led growth, entrenched since the adoption of GEAR and South Africa’s accession to the WTO, has resulted in deindustrialisation, job losses, and the destruction of domestic industry.
The relaxation of capital controls, as a means of strengthening South Africa as an “investment hub,” is another failed neoliberal strategy. Enabling asset managers to shift capital offshore more easily will not build factories, create jobs, or reduce poverty. It will accelerate capital flight, undermine domestic investment, and entrench the dominance of speculative finance over productive activity.
At a moment of deep crisis, characterised by mass unemployment, widening inequality, and an increasing number of climate disasters, South Africa urgently needs an industrial strategy geared towards mass employment, social reproduction, and ecological sustainability. Yet government expenditure on industrialisation is set to decline by R1 billion in real terms in the coming financial year. This exposes the gap between the government’s rhetoric and its priorities.
Within this reality, it is critical to reject austerity, financialisation, and market fundamentalism. Instead, we require a state-led industrialisation programme that expands public ownership, rebuilds productive capacity, creates decent work, and confronts poverty. Anything less is to continue with policies that have failed the working class and the poor.
Defend the Social Wage, Defend Our People
The 2026 budget demonstrates that under austerity, the state is shrinking its responsibilities, and the social wage is under attack. While 60% of spending is allocated to health, education, and social protection, the size of the pie is shrinking. Main budget non-interest expenditure as a share of GDP is dropping from 25,1% in 2022/23 to 23,8% in 2026/27.
Our schools are overcrowded. Children are at risk when travelling to school. Grade R is compulsory, but only 70% is funded. Hospitals are overburdened. Waiting times stretch hours, sometimes days, and too many patients die before receiving care. These are the human costs of austerity.
The public sector has been hollowed out. Had public sector employment kept pace with population growth, there would be 190,000 more public sector workers today. Instead, the government insists on containing the public sector wage bill. In health alone, 97,000 additional workers were needed by 2025, but instead of hiring, we lost 15,000. This is under-staffing as part of fiscal prudence, and it condemns the sick, the young, and the elderly from working-class communities to neglect.
Cuts to post-school education (4,3% in real terms in 2026/27) reduce the chances of young people entering higher education. Children go hungry, are stunted, and malnourished, while the National School Nutrition Programme gives a mere R1,090 per child for a whole year. Austerity prioritises fiscal anchors over human lives.
Social protection is wholly inadequate. The Child Support Grant (CSG) and Social Relief of Distress (SRD) grants remain below the Food Poverty Line of R855 per month. Millions of people are left waiting for a Basic Income Grant that has been promised for four years but never delivered. Meanwhile, children are being unconstitutionally cut from the CSG under the guise of efficiency. This government speaks of ending child stunting by 2030, but the budget makes it impossible to fulfil that promise.
The so-called Gender Budget Statement is meaningless when it is ignored in practice. The budget and its implementation are blind to the daily realities of Black working-class women, whose unpaid labour sustains households and communities. As the state retreats, these women are forced into coerced resilience. Austerity has substantially deepened the crisis of social reproduction, making survival a daily struggle.
Privatisation and Operation Vulindlela
The government’s agenda of privatisation and the financialisation of public infrastructure is now housed under the program called Operation Vulindlela. Through unbundling, deregulation, and the introduction of competitive markets in sectors such as energy, water, transport, and logistics, the state is handing over essential public services to the private sector. Public-Private Partnerships (PPPs), blended finance schemes, and the conversion of public assets into tradable financial instruments are presented as solutions or development, but the reality is clear from both local and international experience that these policies create inaccessible services, hidden debt, and a loss of economic sovereignty.
Around the world, the financialisation of development has imposed fiscal burdens on states while enriching private corporations. The management of Public-Private Partnerships (PPPs) is costly, slow, and bedevilled with failures, yet the public bears the expense while private investors are guaranteed profits. This is not development; it is the commodification of our basic needs.
Operation Vulindlela assumes that South Africa’s current economic structure can deliver inclusive growth and jobs if the private sector is enabled. This is a dangerous myth. Our economy is deeply unequal: unemployment is entrenched, capital is taken offshore, and the private-sector shed jobs rather than creates them. The majority of South Africans remain excluded from meaningful economic participation.
Water
The budget claims to provide basic services to 11,2 million households, yet only 2,8 million households nationally receive indigent support. Over half of all households, 55%, still lack taps inside their homes. In impoverished communities that are lucky enough to have water, taps often run dry due to municipal failures, corruption, and mismanagement, undermining health, safety, and human dignity.
The government has responded by creating the National Water Resources Infrastructure Agency to address the causes of water shortages. The Agency is the entity that will own, manage and invest in the country’s water resources through the promotion of Public-Private Partnerships (PPPs). Private companies will naturally target profitable areas, ignoring low-income communities that rely on free water or cross-subsidised tariffs. Meanwhile, municipalities tasked with facilitating PPPs lack the legal, financial, and technical capacity to implement these projects, particularly in the areas most in need.
This approach will not solve the structural failures of South Africa’s water system. Water is a social right, not a commodity. True solutions demand public-controlled water infrastructure that is adequately resourced and managed to serve all communities equally, not just those that generate profit. This will entrench inequality, deepen poverty, and threaten human dignity.
Eskom and Energy Justice
The revised Eskom unbundling programme shows that the state is slowly recognising what the people and progressive movements have long warned: that the full liberalisation and privatisation of the electricity sector is a disaster. The AIDC has correctly warned about the death spiral of Eskom, where the utility cannot sell enough electricity to remain viable, forcing price increases that further punish working-class households.
The 2026 Budget confirms that the government is relying on private financiers, Independent Power Producers, and Independent Transmission Projects to save the electricity sector. Instead of transforming Eskom into a democratically controlled, publicly accountable utility capable of driving green industrialisation and serving the needs of the people, the state has outsourced its generation and grid development to the private sector. These private entities are guaranteed cost-reflective tariffs, subsidies, regulatory easing, and long-term returns. The working class, the poor, the unemployed, and precarious, will pay the price of these guaranteed profits through soaring electricity costs.
Today, over 10 million households remain trapped in energy poverty, denied safe, reliable, and affordable electricity. Jobs cannot be created, education cannot thrive, and daily life cannot be dignified when families are forced to rely on unsafe alternatives such as paraffin, coal, or wood.
The Budget’s proposal that Eskom take over municipal distribution is not a solution. It deepens the commitment to full-cost recovery, punishing low-income households instead of prioritising energy as a public good.
Reclaiming Jobs and Public Investment
The state’s narrow, neoliberal ideology has blinded it to alternatives. But alternatives do exist if we have the political will to act. South Africa possesses immense wealth; the problem is that it is concentrated in the hands of the few. Taxing the top 1%, a fraction of their total wealth, could raise approximately R192 billion every year. Meanwhile, SARS estimates that R600 billion is lost annually to tax evasion. Properly funding SARS is essential to reclaim stolen wealth and ensure that the richest pay their fair share.
Current tax policies further entrench inequality. The medical aid credit rebate and the retirement fund contribution deduction benefit high-income earners. Cancelling the medical aid credit rebate and converting the retirement fund deduction into a progressive tax credit would shift the burden toward the wealthy and raise an additional R53 billion in revenue, which could instead fund health care, education, and social protection for the majority.
South Africa also sits on vast, idle wealth; an estimated R1.8 trillion in capital lies unused while millions are unemployed. A tax on idle capital would compel the wealthy to invest in productive activity, create jobs, and generate revenue for public needs. The Government Employees Pension Fund (GEPF) holds R2.38 trillion in assets. We need a shift in its mandate to invest primarily in government bonds and strategic public projects rather than global financial markets. This would provide safe, reliable returns for public servants while giving the state an affordable source of funding. Why should South Africa borrow from the IMF or World Bank at high interest rates when we can use our own resources to finance industrialisation, green energy, and job creation?
The wealth exists. What is lacking is the political will to use them to serve the majority rather than the few.
Conclusion
We are at a turning point, yet this budget fails the people. Instead of advancing a gender-responsive agenda, creating decent, secure jobs, and building a social protection floor that guarantees dignity for all, it opens even further the door to the predatory private sector, a sector that has repeatedly shut factories, slashed wages, and deepened inequality. Signalling trust to capital while the majority face unemployment and poverty is a betrayal of the constitutional promise of social justice.
A real strategy to end poverty and inequality requires bold, progressive leadership, state-led investment in jobs and industry, and the mobilisation of trade unions and mass movements to defend and expand the social wage. The people cannot wait for private profit to deliver what the state owes: security, dignity, and a future for all.
