Thandekile Mbatha | Associate | Webber Wentzel | mail me |
The 2026 Budget Speech, delivered by Finance Minister Enoch Godongwana, has generally been described as a “good news” budget. At a macro level, the strides toward fiscal consolidation are notable. Additionally, the increase in VAT for Small and Medium Enterprises (SMEs) reflects a shift in revenue strategy. These developments support key socio-economic measures, including employment.
The government has consistently emphasised the importance of SMEs. It positions them as central to national economic growth. Page 39 of the National Development Plan 2030 states that most new jobs will likely come from domestic-oriented businesses. It also highlights growing SMEs as key drivers of employment.
At this critical juncture for South Africa’s economy, impact investing requires closer attention. It plays a key role in driving growth, enabling change, and delivering measurable impact. In this context, rethinking legal frameworks becomes essential to unlock their full potential.
Impact investing – enabling businesses through commerce and impact
Impact investing aligns closely with ESG principles. It enables sustainable and measurable outcomes. Large corporations now seek ways to deploy capital that serve both commercial and impact objectives. They do so while adhering to relevant regulations and statutes.
For example, Anglo American, together with Kumba Iron Ore, launched an impact investment facility. Kumba Iron Ore committed ZAR 51.2 million to this initiative. The facility aims to support small-to-medium businesses in underserved regions across South Africa.
Another key player in the impact finance space is Edge Growth. In collaboration with its partners, it has deployed approximately ZAR 1.75 billion. This funding supports the development of a sustainable ecosystem for SMEs. These examples illustrate how corporates position capital expenditure within the impact investment framework. They also reinforce the importance of rethinking legal frameworks to support this momentum.
These private sector initiatives are complemented by public sector efforts. The government has taken steps to grow impact investment in South Africa. For instance, it launched the National Taskforce for Impact Investing in 2019. In his 2026 State of the Nation Address, President Cyril Ramaphosa emphasised the importance of investment. He highlighted public infrastructure and labour-intensive growth sectors. These sectors are capable of driving future growth and inclusion.
The government recognises the long-term dividends of priority capital investment. This approach mirrors the objectives of impact investing and ESG frameworks. Furthermore, international investors have expressed interest in South Africa. They aim to unlock value within the local economy. This growing interest further underscores the need for rethinking legal frameworks to ensure alignment and investor confidence.
Legislative gaps – an impact investment inhibitor
The potential of impact investing to support a development-focused state is significant. However, regulatory limitations remain. While South Africa’s economic outlook for 2026/27 shows improvement, the regulatory environment still constrains impact investment.
South Africa maintains a well-developed framework for mainstream investing. This framework includes the Companies Act, B-BBEE laws and tax regulations. It also increasingly incorporates ESG considerations.
Despite this, critical gaps persist. The country lacks a dedicated regulatory framework for impact investing. Key tax incentives have lapsed. Sustainability disclosures remain voluntary. Fiduciary duties lack clarity. Structural constraints continue to limit institutional capital flows. Together, these factors restrict the scale and effectiveness of impact investment.
To attract meaningful levels of impact investment, South Africa must strengthen its regulatory regime. The system must protect investors while supporting innovation. It must also align with the dynamic nature of impact investing. This reinforces the urgency of rethinking legal frameworks in a structured and deliberate manner.
Toward a coherent legal framework
Key questions remain unresolved. Policymakers must define what an effective regulatory regime should look like. They must also identify the legislative and policy adjustments required. These changes should create an attractive environment for both local and international investors.
Currently, both domestic and international jurisprudence show a shift. There is greater scrutiny of non-financial representations, including ESG commitments and sustainability disclosures. There is also increased attention to the broader consequences of investment activity. However, these developments remain fragmented. They also tend to be reactive rather than proactive.
Domestically, the gap is even more pronounced. Courts rarely engage with impact-related considerations. As a result, legal interpretation remains inconsistent. The core principles of impact investing are not fully understood within judicial contexts. This creates uncertainty for investors and limits market development.
In conclusion
If impact investing is to achieve its transformative potential, a more integrated legal approach is required. Legal systems must recognise impact as a legitimate component of investment decision-making. It should not be treated as a peripheral concern. Instead, it should form part of mainstream investment logic.
As the market evolves, stakeholders must monitor how jurisprudence develops. They must also draw lessons from emerging local and international examples. These insights can guide the development of a coherent and future-fit regulatory framework. Ultimately, sustained progress depends on rethinking legal frameworks in ways that align law, policy and market practice.
