Budget Speech 2026Division of Revenue |
Madam Speaker, in 2026/27, 48.9 per cent of nationally raised revenue is allocated to national government, 41.7 per cent to provinces and 9.4 per cent to local government.
The split translates to R951,7 billion for national government, R810.5 billion for provinces and R182,3 billion for municipalities.
Additional allocations to the provincial equitable share include R342 million to progressively equalise Grade R teacher pay, R340 million for the early retirement and voluntary exit programme, and R319 million for the presidential employment initiative.
R1.5 billion is added to the provincial roads maintenance grant in 2026/27 to fund the carry-through costs of the disasters that occurred between April 2024 and June 2025.
Basic Education
In terms of consolidated expenditure, spending on education remains the largest component at 23.7 per cent over the medium term.
Basic education receives R22.7 billion for carry-through costs announced in May 2025. Early childhood development receives the majority of these funds.
R9.9 billion supports employee compensation and other pressures in education.
Early childhood development grant receives an additional R12.8 billion over the next three years, expanding service to an additional 300 000 children.
This will also maintain the increased per child, per-day subsidy of R24 introduced in 2025/26.
The increased allocations align the National School Nutrition Programme to food inflation to continue providing meals to over 9.9 million learners in almost 20 000 schools.
Health
Madam Speaker, R26 billion is allocated to provinces to bolster our HIV/AIDS programme such as the prevention of mother-to-child transmission and the provision of anti-retro virals.
As part of the targeted and responsible savings initiative, provinces will repurpose some of their funding to meet obligations towards PEPFAR. This follows the funding withdrawal by the United States.
R21.3 billion is allocated to the health sector over the medium term for the compensation and employment of doctors, and to make up for shortfalls in goods and services expenditure.
Local Government
Madam Speaker, of the allocated funding to local government, R86.9 billion is to support the provision of free basic services to 11.2 million households.
Local government is the sphere where communities experience the state most directly. Yet many municipalities are in financial and operational distress and therefore unable to deliver services as they should.
Audit outcomes highlight this unacceptable reality: 63 per cent of municipalities are in financial distress, and the proportion of clean audits remains unacceptably low.
A central challenge with municipalities is that they not only differ in capacity, but also in their revenue-raising potential.
This demands a more targeted approach to respond to the diverse pressures facing municipalities.
The National Treasury is revitalising support for development of long-term financial plans.
These plans will improve project identification, sustainably plan cash flows and inform financial decisions. This will negate the challenge of unfunded mandates and limited capacity to maintain infrastructure and sustain services.
Further structural reforms are underway including a comprehensive review of the local government fiscal framework.
Together, these reforms will modernise the intergovernmental system and build a more capable, resilient and appropriately differentiated local government sphere.
Metro Trading Services
Honourable Members, municipalities must return to the foundational principle of fiscal integrity.
Revenue collected for a specified function must first sustain that function before any cross-subsidisation can occur.
In reality, this principle is consistently flouted.
For instance, Johannesburg’s water revenue is R11.9 billion but only R1.3 billion is allocated to Joburg Water for capital expenditure.
This has contributed to the massive backlog of R64 billion that is needed to fix water supply problems in the city.
If this practice of collecting revenue from basic services while diverting the funds to unrelated functions continues, maintenance backlogs will grow, services deteriorate and critical infrastructure systems eventually collapse.
To correct the trajectory, R27.7 billion has been allocated over the medium term to a performance-linked reform for metro trading services in electricity, water, sanitation and solid waste.
This is the first step towards matching revenue collection to reinvestment in the same service.
The reform however goes beyond the performance-based grant structure.
It entrenches operational and financial management reform.
Under the new system, failure to meet reform and operational targets will result in budgets being reduced.
This will strengthen accountability and governance, enabling long-term infrastructure investment.
And supporting the sustainable turnaround of these essential services.
Qualifying municipalities, including eThekwini and City of Johannesburg, have begun implementing Council-approved improvement plans to ring-fence revenue and reinvest in water and electricity.
Municipal Infrastructure Grant Reform
Government is also reforming the municipal infrastructure grant to address persistent underspending, misuse of funds and capacity constraints that hinder effective service delivery in non-metropolitan municipalities.
A split delivery model has been introduced. Municipalities with proven capacity will continue to receive funding directly.
However, where there are serious capacity or governance failures, the delivery will shift to an indirect model.
Capable district municipalities and other accredited implementing agencies will form part of their infrastructure delivery suite.
The intention is to protect citizens from persistent municipal dysfunctions that have long undermined effective service delivery.