After weeks of political debate, Finance Minister Enoch Godongwana finally delivered the 2025 Budget Speech. The delay was due to disputes over the proposed VAT hike, which opposition parties warned would be a “bloodbath” for South African businesses.
They argued that higher VAT would raise costs for struggling small businesses and increase prices for consumers, worsening the cost-of-living crisis. Despite these concerns, the minister confirmed the VAT increase but included measures to soften the blow for low-income households.
To protect the poor, the government expanded the list of VAT-exempt food items. Canned vegetables, dairy liquid blends, and organ meats from poultry, sheep, and other animals are now VAT-free. The minister explained that this move aims to keep essential foods affordable for lower-income families while ensuring that the state can still raise revenue for critical services.
Read: Budget speech delayed for first time since 1994 amid VAT increase dispute
Here is the Budget 2025 overview:
VAT Increase
The government is increasing VAT by half a percentage point in 2025/26 and another half a percentage point in 2026/27, bringing it to 16%. This will raise R28 billion next year to help fund essential services.
Social Grants
Social grants are increasing. The old age and disability grants will go up by R130 to R2,315 per month. The child support grant rises by R30 to R560. The Social Relief of Distress (SRD) grant is extended for another year.
Health
Health spending is growing from R277 billion to R329 billion by 2027/28. An extra R28.9 billion is allocated to keep doctors and nurses in hospitals and ensure pharmacies have enough medicine.
Education
The government will spend R19.1 billion to keep 11,000 teachers in classrooms. Early Childhood Development (ECD) subsidies are increasing from R17 to R24 per child per day. An extra R10 billion will expand ECD to reach 700,000 more children.
Infrastructure Investment
The government will spend over R1 trillion on infrastructure over three years:
- R402 billion for transport and roads
- R219.2 billion for energy
- R156.3 billion for water and sanitation SANRAL will spend R100 billion to maintain national roads. PRASA gets R19.2 billion to improve train services.
Debt and Deficit
The budget aims to stabilize debt at 76.2% of GDP by 2025/26. The government’s goal is to reduce the budget deficit to 3.5% by 2027/28.
No Fuel Levy Hike
To ease cost-of-living pressures, the fuel levy will not increase for another year, saving South Africans about R4 billion.
SARS and Tax Collection
SARS gets an extra R4 billion over the next three years to improve tax collection. More efforts will be made to recover unpaid taxes.
Public Sector Wages
A three-year wage deal was reached, costing R7.3 billion next year. An early retirement plan will save about R7.1 billion per year.
Local Government Support
Provinces get R2.4 trillion over the next three years. Municipalities will receive R115.7 billion in 2027/28 to help provide free basic services to poor households.
Security and Defence
The government is allocating R9.4 billion to fund defence and correctional services. R5 billion will support South Africa’s peacekeeping missions in Africa.
The budget aims to balance tough economic conditions while funding essential services. The government hopes that by stabilizing debt and investing in key areas, the economy will grow and improve lives.
