IRR Proposes Key Reforms Ahead of 2026 Budget Speech

The Institute of Race Relations (IRR), a Johannesburg think tank, has put forward a set of recommendations for Finance Minister Enoch Godongwana as he prepares to deliver his 2026 budget speech this week.

The IRR’s submission focuses on reforming government spending priorities and restructuring capital gains tax (CGT) to boost economic growth and alleviate the pressure on taxpayers.

In its submission, the IRR urges the government to adopt value-for-money principles in public procurement. The organisation suggests removing what it calls black economic empowerment (BEE) premiums from procurement spending, arguing that this will help curb corruption and wasteful expenditure. The IRR says BEE considerations in procurement mean that government spends for more than it needs to on procuring the services and equipment it uses. When securing suppliers, price is not a key factor, rather the BEE status of services providers is prioritised, thereby pushing up government costs.

The IRR said removing these BEE premiums would mean: “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.”

Its second recommendation targets South Africa's CGT system, which, according to the IRR, penalises long-term investors. Currently, CGT is calculated on nominal gains, which can be heavily inflated due to inflation. The IRR proposes a shift to taxing real, inflation-adjusted gains, which would lower the tax burden on investors, particularly those holding assets for long periods. This change would, the IRR argues, encourage investment and foster long-term economic stability.

Makone Maja, strategic engagements manager at the IRR, said, “BEE premiums and CGT deter investment and stifle growth, which ultimately keeps the 42.1% of South Africans unemployed trapped in poverty.” Maja also pointed to the slow pace of job creation, noting that while the economy has experienced growth in recent quarters, it has failed to keep up with the rising demand for jobs. As a result, more discouraged job seekers have entered the labour market, further highlighting the need for structural reforms.