By almost any socioeconomic measure South Africa is in trouble, pointing to the need for a more intense focus on widening the country’s economic base by incentivising the creation of substantially more businesses than has been the case thus far.
The country has way too many unemployed and a high number of people dependent on social grants relative to individual taxpayers.
In addition, those with incomes — from the middle to the bottom of the income scale — have been under pressure for more than a decade because of sharp increases in the cost of living, with electricity tariff increases being but one contributing factor. The economy’s low growth rate has worsened things.
On top of these cost pressures, middle- to low-income earners have had to carry the heaviest burden of the cutbacks in government expenditure, as well as the cost of the decline in the quantum and quality of public services at municipal and provincial government levels.
Then there is the weak tax pillar on which all this rests, a point made sharply in the National Treasury’s 2026 Budget Review. Treasury director-general Duncan Pieterse has also flagged weak household finances as a risk to fiscal sustainability.
The story of all this is told by various data. About two-thirds (65.7%) of pupils were attending no-fee schools in 2024, up from 21.4% in 2007, according to Stats SA’s 2024 general household survey. That means as the cost of living has been rising, South Africans have been shifting their children from fee-paying to no-fee schools. This is at a time when government expenditure per pupil has been declining.
More than 9.9-million learners (about 70% of the total) in 19,800 quintile 1-3 schools are targeted for the provision of nutritious meals over the next three years, according to the department of basic education.
In his budget speech, finance minister Enoch Godongwana said R86.9bn has been allocated to municipalities for free basic services, covering 11.2-million households. That is almost 60% of households (19.5-million, according to Stats SA) that qualify for free basic services: 50kWh and 6,000l of water a month.
Then there is paraffin usage, which has more than doubled since 2014, from 558-million litres (2014) to almost 1.2-billion litres in 2024. It peaked at 1.3-billion litres in 2023. Paraffin usage is a good proxy for energy poverty, which in South Africa’s case would be driven by the increase in electricity tariffs of more than 850% since 2008.
All this rests on what the Treasury has described as a wobbly income tax system. The top 13% of individual taxpayers pay more than 60% of personal income tax, which is projected at R786bn for 2025/26 — almost 40% of total tax revenue.
The Treasury warns that South Africa has become heavily reliant on personal and corporate income taxes, which contributed about 55% of the total tax take in 2023. Even VAT, which is meant to be a broad-based tax, relies on the top four income deciles for more than 75% of the revenue it raises. A decile represents a split of the population into 10 equal parts, with the bottom decile being the poorest group and the top the richest.
There can be no debate about protecting the most vulnerable in society, but to do so sustainably South Africa will have to pump more energy into getting the economy to grow by no less than 4% a year for a decade or more.
• Sikhakhane, a former spokesperson for the finance minister, National Treasury and South African Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.
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