Simone Cooper | Head | Business & Commercial Banking | Standard Bank South Africa | mail me |
South Africa’s 2026 National Budget has delivered targeted SME relief for small and medium-sized enterprises (SMEs). This includes a significant increase in the Value Added Tax (VAT) registration threshold. It also introduces enhanced capital gains tax exemptions for qualifying business owners.
In his Budget Speech, Minister of Finance Enoch Godongwana announced that the VAT registration threshold will increase to R2.3 million. He responded directly to concerns that compliance costs have not kept pace with the rising cost of doing business.
Regulatory SME relief gains momentum
The measure follows this month’s State of the Nation Address (SONA) pronouncements on SME support. As a result, it provides practical regulatory and cash-flow relief for SMEs, particularly those in the growing enterprise sector.
The budget gives practical effect to aspects of this month’s SONA. In particular, it reduces compliance pressure for SMEs and reinforces regional trade integration. While SONA set out ambitious growth and funding commitments for the sector, the Budget signals early delivery. It does so through regulatory SME relief and trade enablement measures.
Minister Godongwana further confirmed that:
- The capital gains tax exemption on the sale of a small business for older persons will increase from R1.8 million to R2.7 million; and
- The qualifying business value cap rises from R10 million to R15 million.
VAT threshold increase eases pressure on SMEs
The VAT threshold increase is a tangible intervention for growing businesses. For many SMEs, compliance costs can be disproportionate to turnover. The increase in the VAT registration threshold to R2.3 million is a welcome and practical measure. This adjustment creates breathing room for entrepreneurs to reinvest in growth. It strengthens resilience and allows them to focus on expansion rather than administration.
Beyond SME compliance relief, the budget reinforces South Africa’s commitment to regional integration. Minister Godongwana emphasised that a key policy objective is to ensure that the financial sector supports regional integration and the implementation of the African Continental Free Trade Area (AfCFTA).
The minister also confirmed that the National Treasury will ease certain cross-border capital flow restrictions. This step will improve competitiveness and position South Africa as a hub for investment into the continent.
Among the most advanced public-private partnership initiatives are six border post projects. These projects aim to ease congestion and lift regional trade flows. At the same time, logistics reforms seek to dismantle rail and port bottlenecks. These bottlenecks have constrained exports and raised the cost of doing business.
These measures reinforce work already underway in the private sector. We have long supported clients operating across Africa in alignment with the AfCFTA. The budget’s focus on regional integration, capital flow flexibility and improved trade infrastructure reinforces this trajectory.
Infrastructure investment and fiscal stabilisation
The budget places significant emphasis on infrastructure investment. Public-sector spending is expected to exceed R1 trillion over the medium term. This allocation covers state-owned companies, provinces and municipalities. Transport and logistics represent the largest share.
These commitments accompany energy transmission reforms and water infrastructure investment. Together, they aim to remove structural bottlenecks that have weighed on economic growth.
Minister Godongwana confirmed that government debt will stabilise for the first time in 17 years. It will then begin to decline over the medium term. This trajectory reinforces fiscal credibility and investor confidence. Economic growth is projected at 1.6% for 2026.
Targeted SME relief improves short-term viability. However, sustained growth will depend on reliable infrastructure, efficient payment systems, strong trade corridors and continued access to finance. While the 2026 Budget provides important building blocks, the focus now shifts to implementation.
