As we settle into the new year, the economic and diplomatic landscape of South Africa continues to grapple with the seismic shifts initiated back in early 2025. Looking back at the last 12 months, the ripples caused by changes in US foreign policy, labor costs, and international tax laws are still shaping our daily reality.
With the 2026 National Budget around the corner and a new wage cycle approaching, here is a wrap-up of where we stand today based on the foundations laid last year.
The New Normal in US-SA Relations
It has been nearly a year since the significant diplomatic cooling between Pretoria and Washington, triggered by debates over South Africa’s land reform policies. The suspension of key USAID funding, specifically the roughly $440 million previously allocated largely to HIV/Aids relief, forced a stark realization upon us in 2025: reliance on foreign aid is a vulnerability we can no longer afford to ignore.
While the initial shock has passed, the conversation has shifted from “panic” to “sovereignty.” The funding cuts, which aligned with a broader US trend of scaling back global foreign aid, highlighted the urgent need for South Africa to build robust domestic systems that are immune to the unpredictable policy shifts of donor nations.
The lesson for 2026 is clear: policymakers must weigh how local legislation, like the Expropriation Act, is perceived globally, as the economic consequences are rarely contained within our borders.
The Wage Squeeze: A Year in Review
In March 2025, the national minimum wage was hiked to roughly R28.79 per hour, a 4.4% increase at the time. As we approach the next potential adjustment in March 2026, the impact of that hike is evident across the small business sector.
Over the past year, many SMEs have faced the predicted “trilemma”: raising prices, reducing working hours, or, in unfortunate cases, cutting staff. While the intention was to shield workers from inflation, the reality on the ground has been a delicate balancing act for employers operating on thin margins. Although exemption systems exist, they remain temporary and administrative-heavy. As we await the announcement for the 2026 rates, the focus remains on compliance and the difficult trade-offs businesses are making to keep the lights on without stifling growth.
Tax Trends: Budget 2026 Expectations
With the next Budget Speech imminent, we are seeing a recurrence of the anxieties that plagued us in early 2025. Last year saw the adoption of the global minimum tax, targeting multinational companies paying low rates in jurisdictions like Dubai. While the government projected meaningful revenue collection from this (targeting around R8 billion), skepticism remains about whether this has actually materialized, given that only a handful of large companies were truly exposed.
Looking ahead to February 2026, the rumor mill is spinning the same threads as last year. The medical tax credit remains a likely target for elimination to fund the National Health Insurance (NHI) ambitions. Furthermore, while corporate tax rates have stabilized in line with global trends, the perennial debate around a “wealth tax” continues to hover over the middle and upper classes.
The silver lining? VAT increases remain politically unpalatable, meaning the focus is likely to stay on broadening the tax base rather than hiking the rate, though the debate on zero-rating more essential goods continues to divide opinion between the Treasury and the Presidency.
Stay Ahead of the 2026 Tax Curve Body
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