South Africa Unveils Key Reforms to Overhaul 2026 Budget Planning Framework

In a decisive step toward modernising its fiscal governance, the South African National Treasury has released a set of sweeping reforms that will guide the development of the 2026 national budget, marking a significant departure from traditional budget formulation approaches that have struggled to keep pace with the country's evolving economic, institutional, and political context.

Outlined in the newly published 2026 Medium-Term Expenditure Framework (MTEF) Technical Guidelines, these reforms are aimed at tackling the long-standing weaknesses in the budget process, namely fragmented decision-making, misalignment between policy and budget, and ineffective prioritisation in a constrained fiscal environment.

The changes are being implemented under the authority of Section 27(3) of the Public Finance Management Act (PFMA), which empowers the National Treasury to determine the format and structure of the national budget.

Motivation Behind the Reform

In its statement released on Wednesday, National Treasury acknowledged that the country’s existing budget architecture has failed to adapt to modern fiscal challenges, leading to inefficiencies, blurred accountability, and minimal impact from public spending.

A review of the budget process identified several key deficiencies:

• Lack of clear trade-offs amid competing priorities

• Weak consensus among departments and policymakers on fiscal strategy

• Poor coordination between funding allocations and intended policy outcomes

• Limited transparency in programme effectiveness and cost-benefit evaluation

The new guidelines aim to rectify these structural flaws and place South Africa on a trajectory toward long-term fiscal sustainability while ensuring improved delivery on national development goals.

Core Fiscal Objectives and Policy Continuity

The 2026 MTEF builds on the policy foundations laid out in the 2025 Budget, and continues to pursue four main fiscal objectives:

1. Stabilising the debt-to-GDP ratio

2. Achieving a primary budget surplus

3. Expanding infrastructure investment

4. Supporting the social wage — including social grants, education, and healthcare

To create room for these priorities, National Treasury is adopting a Targeted and Responsible Savings (TARS) approach, which seeks to reallocate limited resources more strategically by cutting underperforming or redundant programmes.

Tools for Budget Reprioritisation

To operationalise the TARS framework, the Treasury will deploy a number of technical instruments:

1. Spending Reviews

• Update previous spending reviews to reflect new data and fiscal realities

• Implement findings from new sectoral reviews, such as those on Active Labour Market Policies (ALMPs)

• Act on the infrastructure conditional grant review, which evaluates how provinces and municipalities manage capital spending

2. Data-Driven and Technological Approaches

• Use digital platforms and cross-referenced databases to detect and eliminate double-dipping in programmes like social grants and the Community Works Programme

• Conduct annual audits of ghost workers and payroll anomalies

• Enforce the rationalisation of public entities and departments, guided by updated proposals

• Implement outcomes from the DPSA personnel expenditure review

• Conclude a comprehensive review on public entities’ remuneration frameworks

These reforms are underpinned by a commitment to evidence-based budgeting, greater inter-departmental coordination, and improved oversight of fiscal performance at all levels of government.

Institutional Realignment for Efficiency

Beyond expenditure reform, Treasury has signalled its intention to align institutional roles with budget responsibilities. This includes conducting:

• Technical baseline analyses of spending patterns

• Institutional reviews to ensure that departments and public entities are functionally aligned to their core mandates

These assessments will serve as a basis for the 2026 budget structure, helping to eliminate overlap, reduce fragmentation, and strengthen institutional accountability.

Cabinet-Approved Reform Roadmap

Importantly, the 2026 budget reform guidelines and calendar have been formally approved by Cabinet, ensuring political backing at the highest level. This approval marks the beginning of what Treasury calls a multi-year reform journey, aimed at embedding discipline, transparency, and strategic alignment in South Africa’s public finances.

“Government reaffirms its commitment to a more disciplined, transparent, and strategically aligned budget process that supports South Africa’s long-term fiscal objectives and national development priorities,” Treasury said.

Looking Ahead

While the reform process is still in its early phases, the 2026 MTEF signals a transformative shift in how South Africa manages its public finances. If implemented effectively, the reforms promise to deliver a more results-oriented, value-for-money approach to budgeting — a critical step in regaining public trust and unlocking the country’s development potential.