IRR’s 2026 Budget tips for Minister Godongwana

Fixing spending priorities and reforming Capital Gains Tax are the key areas of budget tips the Institute of Race Relations (IRR) has submitted in response to Minister of Finance Enoch Godongwana’s invitation to the public for ideas in crafting his 2026 Budget Speech.

The speech is due to be delivered on Wednesday next week.

Topics National Treasury suggested as subjects on which the public might wish to offer advice ranged from dealing with the budget deficit and matters of debt sustainability to policies regarding taxes.

The IRR has made two separate submissions, on government spending priorities and taxes, emphasising the important knock-on effects of such reforms on economic growth, curbing wasteful expenditure and ensuring that the country’s over R1 trillion annual public procurement budget better serves the needs of South Africans.

The first submission urges the government to make value for money the primary consideration in procurement to improve service delivery and curb corruption. The second recommends reforming Capital Gains Tax (CGT) so that it taxes real, inflation-adjusted gains rather than nominal gains.

The IRR’s first tip argues that adopting the principle of maximising value for money in procurement, and cutting Black Economic Empowerment premiums out of public procurement expenditure, will enable true transformation and economic growth. In this way, spending of taxpayers’ money would be strictly limited to providing all South Africans with quality basic services, thus delivering development across all communities. This would strengthen business activity and investor confidence by allowing companies to focus on growing their businesses and creating jobs rather than having to plug the many gaps caused by the non-value-for-money spending that is the current reality.

The second submission argues that Capital Gains Tax in effect punishes long-term capital investors by increasing the tax cost of patient capital. The submission points out that when assets are held for years, inflation often forms a large share of the measured gains. The CGT calculation thus categorically overstates the real increase in purchasing power that an owner has come to realise through capital gains. The critique holds true for all assets but is most acutely perverse in the case where nominal capital gains are equal to the inflation rate. In that case, a person has enjoyed a positive nominal gain, but zero real gain in purchasing power, and yet still is taxed as if he or she enjoyed a real gain.

Says IRR Strategic Engagements Manager Makone Maja: “BEE premiums and CGT deter investment and stifle growth, which ultimately keeps the 42.1% of South Africans who are unemployed in terms of the expanded unemployment definition trapped in poverty. The latest unemployment numbers reveal that while the economy turned to growth for four successive quarters, slow economic growth fails to catch up to the demand for jobs as the economy added five times more discouraged job seekers than it did jobs. Minister Godongwana can show that he is genuinely committed to bold and necessary reforms by endorsing these IRR budget tips.”

Media contact: Makone Maja, IRR Strategic Engagements Manager Tel: 079 418 6676 Email: makone@irr.org.za

Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za