Finance Minister Enoch Godongwana has finally delivered the much-anticipated 2025 Budget Speech after a month-long delay.
The address, held in Parliament on Wednesday, saw the minister attempt to lighten the mood with a football-related joke that didn’t quite land. But once the speech got underway, it was clear that South Africans were in for some significant economic changes, including tax hikes, spending adjustments, and infrastructure investments.
The major announcements from the 2025 Budget Speech
One of the most controversial decisions in this year’s budget was the increase in VAT.
Godongwana announced that VAT would be hiked by 0.5 percentage points in 2025/26, followed by another 0.5 percentage point increase in 2026/27, bringing the VAT rate to 16%.
The minister justified the decision by arguing that South Africa’s personal and corporate tax rates were already too high, making VAT the only viable option for raising additional revenue.
The move has already been met with backlash from opposition parties, particularly the DA, Freedom Front Plus, and EFF, who have voiced their opposition to any VAT increase.
To cushion lower-income households from the VAT hike, the government will expand the zero-rated food basket, now including canned vegetables, dairy liquid blends, and certain organ meats.
Social grants will also see above-inflation increases and the fuel levy remains unchanged for another year, which Treasury says will save consumers around R4 billion.
Debt, deficit, and economic outlook
Godongwana confirmed that South Africa’s debt-to-GDP ratio is projected to stabilise at 76.2% in 2025/26, with the consolidated budget deficit narrowing to 3.5% by 2027/28.
However, debt servicing costs remain a major issue—South Africa will spend R386 billion on debt service this year, meaning 22 cents of every rand in revenue will go toward repaying loans rather than funding essential services.
Despite this, Treasury expects the economy to grow by 1.8% over the medium term, following 0.6% growth in 2024. The government is banking on four key pillars to accelerate growth:
- Maintaining macroeconomic stability
- Implementing structural reforms
- Improving state capacity
- Accelerating infrastructure investment
Social grants and spending priorities
The R350 Social Relief of Distress (SRD) grant has been extended until March 2026, with R35.52 billion allocated for this purpose. Treasury confirmed that the grant will serve as the foundation for a more permanent income support system for unemployed individuals, but the details are still being debated.
Meanwhile, spending on health and education is set to increase.
Provinces will receive R2.4 trillion over the next three years, with additional allocations to retain critical staff. Godongwana admitted that the public health sector has lost nearly 9,000 healthcare workers in the past year due to budget constraints and said efforts were being made to reverse this trend.
The defence budget has also grown slightly, increasing to R58.52 billion—a 4.6% nominal rise, which barely keeps up with inflation.
Meanwhile, an additional R19.2 billion has been allocated for rail infrastructure to improve train services in areas like Mamelodi, KwaMashu, Motherwell, Khayelitsha, and Naledi.
What this means for the average South African
With the VAT increase looming, consumers will feel the pinch, but government argues that expanding the zero-rated food list and keeping fuel levies unchanged will offer some relief.
The tax burden on individuals remains heavy, as there will be no inflationary adjustments to tax brackets, meaning taxpayers will pay more due to bracket creep.
The bottom line? South Africans can expect higher taxes, tighter spending controls, and a focus on long-term economic stability—though whether the government can execute its plans effectively remains to be seen.
