South Africa's 2025 Budget Speech 3.0

The 2025 Budget Speech, delivered by Finance Minister Enoch Godongwana, outlines South Africa’s economic priorities, tax adjustments, and spending plans. Here’s a breakdown of the key takeaways:

Economic Outlook

  • GDP Growth: The National Treasury projects a GDP growth of 1.4% for 2025, down from the earlier estimate of 1.9%, due to global trade tensions, high interest rates, and domestic constraints such as logistical bottlenecks.

  • Debt Stabilization: Government debt is expected to stabilize at 77.4% of GDP in 2025/26, higher than the previously projected 76.2%, largely due to a weaker nominal GDP outlook.

  • Debt-Service Costs: Debt-service costs are projected at R424.9 billion, consuming a significant portion of the budget and limiting the government's ability to invest in infrastructure and job creation initiatives. Exceeding R1.2 billion per day. 22% of total revenue – more than spending on health, policing, and education.

Fiscal Strategy & Structural Reforms

The government's fiscal strategy centers on:

  1. Macroeconomic Stability: Ensuring sound financial management to maintain investor confidence.

  2. Structural Reforms: Improving electricity, water, and logistics sectors to enhance service delivery and economic efficiency.

  3. State Capability: Enhancing governance and efficiency across all levels of government.

  4. Infrastructure Investment: Expanding transport, energy, and water projects to stimulate economic growth.

Operation Vulindlela has achieved notable successes:

  • 22,500 MW of energy projects in the pipeline.

  • 51% decrease in mobile data costs, improving digital access.

  • Cleared water-use license backlog, unlocking stalled investments.

  • Expansion of e-Visas to 34 countries to boost tourism.

Infrastructure Investments

Over the next three years, the government will allocate more than R1 trillion towards infrastructure:

  • R402 billion – Transport & logistics

  • R219.2 billion – Energy

  • R156.3 billion – Water & sanitation

New Public-Private Partnership (PPP) regulations (effective 1 June 2025) will simplify private sector participation in infrastructure development.

Tax & Revenue Measures

  • VAT Increase: The proposed increase to VAT has been withdrawn following extensive political and public opposition. As a result: VAT will remain at 15%. The planned expansion of the zero-rated VAT basket has been cancelled.

  • In its place, the only new tax measure introduced is an inflation-linked increase to the General Fuel Levy:

    • +16 cents/litre for petrol

    • +15 cents/litre for diesel

    Effective 4 June 2025.

    To make up for the shortfall from the VAT reversal and weaker economic conditions, tax revenue projections have been reduced by R61.9 billion over the medium term.

  • No Inflationary Adjustments: Personal income tax brackets, rebates, and medical tax credits remain unchanged.

Social & Public Services Spending

  • Education:

    • R508.7 billion allocated, ensuring continued investment in schools, teacher salaries, and learning materials.

    • R55.4 billion for the National Student Financial Aid Scheme (NSFAS).

    • Early Childhood Development (ECD) subsidy increased from R17 to R24 per child per day, enabling 700,000 more children to access early education.

  • Healthcare:

    • R298.9 billion allocated, including district health services (R132.1 billion), central hospital services (R58.3 billion), and provincial hospital services (R49.0 billion).

    • R20.8 billion added to employ 800 post-community service doctors, reduce accruals, and cover key inputs.

  • Defence:

    • R5 billion allocated to strengthen military capacity in light of regional instability.

    • But 2025/26 allocation increased from R1.8 billion to R3 billion to fund a safe, phased withdrawal

  • Elections:

    • R1.4 billion allocated for the 2026 local government elections

    • R885 million to the IEC, R550 million to SAPS and SANDF

Public Finance & Governance Reforms

  • Audit of ghost workers to eliminate wasteful expenditure.

  • Municipal performance-based funding to improve service delivery.

  • R3.5 billion allocated to SARS to enhance tax compliance and enforcement.

Conclusion

The 2025 budget prioritizes economic recovery, infrastructure development, and social support, while balancing tax increases with measures to protect vulnerable households. With a focus on long-term growth and fiscal responsibility, the government aims to create a more sustainable and inclusive economy.

For more insights, visit National Treasury’s official website.