STABILISATION FOR MARKETS, NOT TRANSFORMATION FOR THE PEOPLE
The South African Federation of Trade Unions (SAFTU) rejects the 2026 National Budget as a consolidation framework that entrenches austerity under the language of stability and credibility.
The Minister celebrates narrowing deficits, stabilising debt ratios and rising primary surpluses. But for the working class, the unemployed, and communities facing collapsing services, this budget does not represent renewal, it represents continuity of a contractionary fiscal path.
The Real Policy Anchor: Primary Surpluses
The most politically significant feature of the 2026 Budget is the commitment to sustained primary surpluses, rising from 0.9% of GDP to 2.3% over the medium term.
The Government spending (G) is a driver of demand. Sustained primary surpluses reduce net fiscal injection into the economy. In a country facing mass unemployment, deindustrialisation, municipal collapse and infrastructure decay, this is a contractionary stance. It suppresses demand when expansion is required. Debt stabilisation is presented as discipline. In reality, it is a political prioritisation of bond market confidence over social reconstruction.
Weak Growth, No Structural Break
Economic growth is projected at 1.6% in 2026, rising to only 2% by 2028.
At this pace:
• Structural unemployment will not fall meaningfully.
• Manufacturing decline will not reverse.
• Poverty reduction will stall.
• Informalisation will deepen.
South Africa requires sustained growth well above 4–5% to make serious inroads into unemployment. Instead, this budget normalises stagnation and builds fiscal consolidation around it.
There is no decisive break with the extractivist structure of the economy. There is no aggressive localisation strategy embedded in infrastructure spending. There is no state-led industrial surge.
Stability without transformation entrenches inequality.
Debt Stabilisation at the Cost of Public Capacity
Debt is projected to peak at 78.9% of GDP and gradually decline. The deficit narrows steadily.
This is achieved through:
• Wage bill containment.
• Early retirement programmes.
• Efficiency savings.
• Tight expenditure ceilings.
The consequences are already visible:
• Unfilled nursing and medical posts while facilities are overstretched.
• Overcrowded classrooms due to educator vacancies.
• Backlogs in courts and weakened prosecutorial capacity.
• Under-resourced policing in high-crime communities.
Debt ratios improve. Public service capacity erodes.
The Social Wage: Maintained, Not Expanded
The budget emphasises that more than 60% of non-interest spending goes to the social wage. Social grants rise modestly. Education remains the largest functional allocation. Health receives additional funding for HIV/AIDS and compensation pressures.
However, nominal increases do not equal real expansion.
With inflation and population growth absorbing most of the increases, real per capita improvements are marginal at best.
Hospitals remain overcrowded.
Schools remain under-resourced.
Municipal infrastructure continues to deteriorate.
The social wage is preserved at survival level, not expanded as a transformative instrument of redistribution.
Illicit Trade: A National Revenue Crisis Ignored
The scale of illicit trade in South Africa has reached catastrophic levels.
Recent research indicates that approximately 75% of cigarettes sold in South Africa are illicit. This represents a collapse of the legal market and billions of rands in lost excise revenue. Domestic manufacturing has been devastated as legal producers are squeezed out.
In the alcohol sector, illicit trade accounts for approximately 18% of total consumption by volume, and around 7% of total market value, again representing substantial fiscal leakage.
Yet the Budget did not announce decisive new structural measures to address this crisis.
There was no commitment to:
• Mandatory installation of production-line cameras in tobacco and liquor factories linked in real time to SARS.
• Comprehensive digital track-and-trace systems across excisable supply chains.
• Automatic compliance shutdown mechanisms for non-reporting producers.
• Clear revenue recovery targets tied to illicit trade reduction.
Without real-time production monitoring and technological enforcement, the illicit market will continue to expand, undermining both revenue collection and legitimate industry.
Acknowledging the problem without structural reform is inadequate.
Silence on Illicit Financial Flows and Corporate Tax Avoidance
The budget also fails to confront the broader crisis of illicit financial flows and corporate tax avoidance.
There was no comprehensive strategy against:
• Trade misinvoicing.
• Transfer pricing manipulation.
• Base erosion and profit shifting.
• Capital flight through tax havens.
There was no wealth tax proposal, no solidarity tax, no corporate tax increase, and no windfall tax.
Instead, indirect levies rise while structural wealth concentration remains untouched.
The state is firm in collecting excise from consumers but cautious in confronting concentrated capital. This is selective enforcement and entrenches fiscal injustice.
Infrastructure: Financialised, Not Developmental
The trillion-rand infrastructure pipeline is structured around public-private partnerships, credit guarantees and private capital mobilisation.
This model de-risks investment for private capital while the state absorbs risk. Infrastructure without binding localisation, beneficiation and domestic manufacturing conditions risks reinforcing import dependence rather than building productive capacity. Operation Vulindlela restructures regulatory frameworks to attract private investment; it does not socialise productive capacity or transform ownership patterns.
The Core Contradiction
This budget stabilises debt.
It does not stabilise society.
It reassures markets.
It does not restructure the economy.
It preserves social commitments.
It does not expand them.
A Different Path Is Required
South Africa’s crisis is not primarily fiscal. It is structural, productive and distributive.
SAFTU calls for:
• Suspension of primary surplus targeting during a mass unemployment crisis.
• Progressive wealth and corporate tax reform.
• Aggressive technological and legislative enforcement against illicit trade and illicit financial flows.
• Immediate filling of critical public sector vacancies.
• Large-scale public employment and industrial expansion anchored in localisation and beneficiation.
• Public developmental financing of infrastructure, not financialised PPP models.
• Establishment of a permanent Basic Income Guarantee.
Debt stabilisation may restore credibility in financial markets.
It does not restore dignity to the unemployed.
Until fiscal policy is reoriented toward structural transformation and redistribution, stabilisation will remain an end in itself, not a pathway to social justice.
People before profits.
Build the economy around jobs, not debt ratios.
A statement was issued on behalf of SAFTU by the General Secretary, Zwelinzima Vavi.
For media inquiries, contact the National Spokesperson at
Newton Masuku
newtonm@saftu.org.za
0661682157
Media Officer
Asive Dyani
0719019564
