Heading into Budget 2026, we expect a broadly investor-friendly tone – but this year there is a clear swing factor: gold.

The sharp rally (spot above $4,900/oz) has likely boosted mining tax receipts, corporate income tax, royalties and SARB reserve valuations. This is a buffer Treasury simply did not have a year ago.

The key question for markets is how that windfall is deployed.

If Treasury directs stronger commodity-linked revenues toward deficit reduction rather than new expenditure, we could see:

• Lower-than-expected net issuance
• Improved debt-stabilisation metrics
• Further compression in long-end yields
•  A constructive signal to ratings agencies.

The bond market is increasingly sensitive to issuance dynamics. Even modest reductions in weekly supply – particularly in the 2040–2053 sector – would materially support the long end.

Conversely, if higher revenues are absorbed into new commitments without offsetting restraint, any relief may prove temporary. With local government elections later in 2026, the political temptation to spend will be real.

Our bias remains that Treasury leans toward credibility. The GNU framework and recent market stability create strong incentives to protect investor confidence.

For bonds, this is not about rhetoric – it is about net supply.

1. VAT or indirect tax wildcards

A full VAT rate hike looks unlikely, but smaller indirect measures are possible. This could include tweaks to VAT exemptions, fuel levies, or excise duties, which are often used to raise revenue without announcing a headline tax increase.

2. Tax bracket creep and households

Bracket creep is already putting pressure on households. If tax brackets aren’t adjusted for inflation, people end up paying more tax in real terms, even though their purchasing power hasn’t improved.

3. Local government elections and Budget priorities

Yes, politics does play a role. With elections approaching, government is likely to avoid harsh or unpopular measures and focus instead on stability and targeted support rather than bold fiscal changes.

4. Balancing fiscal discipline and growth

Markets want credibility more than austerity. Government doesn’t need to cut aggressively, but it does need to show spending control, reform progress, and a clear path to stabilising debt to support growth and regain investment-grade status.

5. Risk of fiscal slippage

Avoiding slippage is possible, but execution is key. The main risk isn’t new spending announcements, but weak control at SOEs and municipalities, where overruns often occur.

Other comments

Overall, Budget 2026 is likely to be more about reassurance than major surprises – reinforcing fiscal discipline, protecting the reform narrative, and maintaining investor confidence.

Expert Insights by Kristof Kruger, Senior Fixed Income Trader at Prescient Securities