By: Lonwabo Mtyeku | Photo Credit: Supplied
Seen Here: Simone Cooper, Head of Business and Commercial Banking at Standard Bank South Africa. Photo Credit: Standard Bank
25 February 2026 — South Africa’s 2026 National Budget has delivered a measured yet meaningful intervention for small and medium-sized enterprises (SMEs), pairing regulatory relief with structural reforms aimed at restoring growth momentum and strengthening regional trade integration.
In his Budget Speech, Finance Minister Enoch Godongwana announced that the VAT registration threshold will increase to R2.3 million — a move widely welcomed by business leaders who have long argued that compliance costs have escalated disproportionately to turnover in the SME sector.
The adjustment follows commitments made earlier this month during the State of the Nation Address and signals early implementation of government’s support agenda for entrepreneurs and growing firms.
Practical Relief for Growing Businesses
The VAT threshold increase represents more than a technical adjustment; it provides immediate cash-flow and administrative relief for thousands of businesses hovering near the previous threshold. For many SMEs, mandatory VAT registration can trigger additional accounting costs, reporting burdens, and liquidity constraints — particularly in the early stages of scaling.
By lifting the threshold to R2.3 million, government effectively widens the runway for smaller enterprises to consolidate operations, reinvest retained earnings, and strengthen working capital before absorbing additional compliance obligations.
Further support comes through enhanced capital gains tax (CGT) relief for qualifying business owners:
- The CGT exemption on the sale of a small business for individuals aged 55 and older increases from R1.8 million to R2.7 million.
- The qualifying business value cap rises from R10 million to R15 million.
These changes are designed to incentivise succession planning, unlock entrepreneurial liquidity, and encourage reinvestment within the domestic economy.
Aligning Policy with Regional Ambition
Beyond SME relief, the Budget sharpens South Africa’s commitment to regional integration under the African Continental Free Trade Area (AfCFTA).
Minister Godongwana reaffirmed that a core policy objective is to position South Africa as a financial gateway to the continent. To this end, National Treasury will ease certain cross-border capital flow restrictions — a step aimed at improving competitiveness and facilitating intra-African investment.
Six advanced public-private partnership projects at major border posts are expected to reduce congestion and accelerate trade flows, while logistics reforms target persistent rail and port bottlenecks that have constrained exports and elevated input costs.
Together, these measures address structural impediments that have dampened productivity and weighed on business confidence.
Infrastructure as a Growth Multiplier
The 2026 Budget places infrastructure at the centre of its economic strategy. Public-sector infrastructure spending is projected to exceed R1 trillion over the medium term, spanning transport networks, logistics corridors, energy transmission, and water systems.
Transport and logistics command the largest allocation — a signal that government recognises infrastructure reliability as a prerequisite for export competitiveness and industrial expansion.
Reforms to energy transmission and water infrastructure further aim to alleviate systemic constraints that have undermined private-sector performance in recent years.
Fiscal Stabilisation and Investor Confidence
In a development closely watched by markets, government debt is projected to stabilise for the first time in 17 years before gradually declining over the medium term. Economic growth is forecast at 1.6% for 2026 — modest but reflective of a stabilising macroeconomic environment.
Fiscal consolidation, paired with structural reform, is intended to restore credibility while avoiding austerity measures that could stifle fragile recovery.
The Implementation Test
While the VAT threshold increase and CGT adjustments provide tangible relief, economists caution that regulatory easing alone cannot unlock sustained growth. The durability of SME expansion will depend on reliable infrastructure, efficient payments systems, functioning trade corridors, and continued access to finance.
The 2026 Budget lays foundational building blocks. The decisive factor now shifts from policy design to policy execution.
If implemented with discipline and urgency, these reforms could recalibrate South Africa’s growth trajectory — empowering SMEs not merely to survive, but to scale, integrate regionally, and compete globally.
