Winners and Losers in SA’s 2025 Budget – What You Need to Know

Finance Minister Enoch Godongwana delivered the much-anticipated 2025 National Budget Speech on Wednesday, outlining a pragmatic approach to tackling South Africa’s economic challenges. The budget emphasizes macroeconomic stability, structural reforms, and infrastructure investments while addressing pressing social needs. However, opposition parties, businesses, and consumer groups have raised concerns over certain fiscal measures, particularly the increase in Value-Added Tax (VAT).

Economic Growth and Fiscal Strategy
The Minister acknowledged South Africa’s prolonged economic stagnation, with GDP growth averaging below 2% over the past decade. In 2024, the economy expanded by a mere 0.6%, with projections for the medium term averaging 1.8%. To stimulate growth, the government is prioritizing macroeconomic stability, structural reforms, and enhanced infrastructure investments.

A key fiscal objective is maintaining a primary budget surplus, projected at 0.5% of GDP in 2024/25 and increasing to 0.9% in 2025/26. Government debt is expected to stabilize at 76.2% of GDP, while the budget deficit will narrow to 3.5% by 2027/28. Debt-service costs remain a significant burden, amounting to R389.6 billion in the current financial year.

Major Spending Priorities
The government has allocated R1 trillion over three years to infrastructure development, focusing on:
Transport and logistics (R402 billion)
Energy infrastructure (R219.2 billion)
Water and sanitation (R156.3 billion)

In education, R19.1 billion is set aside to retain 11,000 teachers, while early childhood development funding is increased to expand access to an additional 700,000 children. The health sector sees an increase to R329 billion by 2027/28, with R28.9 billion earmarked to retain 9,300 healthcare workers and employ 800 post-community service doctors.

Social grants will rise, with old age and disability grants increasing by R130 to R2 315 per month, and the child support grant growing by R30 to R560. The Social Relief of Distress (SRD) grant is extended until March 2026, with a long-term income support model under review.

Tax Changes and Revenue Generation Draw Criticism
To fund increased spending, the government will implement a VAT hike from 15% to 16% by 2026/27, raising R28 billion in additional revenue in 2025/26 and R14.5 billion in 2026/27. There will be no inflationary adjustments to personal income tax brackets or rebates. However, VAT zero-rated food items will expand to include canned vegetables, dairy liquid blends, and specific organ meats to mitigate the impact on lower-income households.

Opposition Response:
Opposition parties have strongly criticized the VAT increase, arguing that it disproportionately affects low-income earners. The Democratic Alliance (DA) has called the tax hike “a blunt instrument that punishes the poor,” while the Economic Freedom Fighters (EFF) have labeled it “anti-poor and regressive.” Both parties have demanded alternative revenue sources, including higher corporate taxes and stricter enforcement against tax evasion by large companies.

Business and Consumer Concerns:
Business leaders have voiced mixed reactions, with some praising infrastructure investments but warning that higher VAT could dampen consumer spending. “The increase in VAT will put additional pressure on already struggling households and could slow retail sales growth,” said Busi Mavuso, CEO of Business Leadership South Africa. Consumer advocacy groups have also expressed concerns, warning that the VAT increase could lead to higher food prices despite the expansion of zero-rated items.

Structural Reforms and Public-Private Partnerships
The government reaffirmed its commitment to the Operation Vulindlela (OV) initiative, which has made significant progress in stabilizing electricity supply, reducing logistics bottlenecks, and improving digital communication and water management. Phase 2 of OV will focus on strengthening local governance and harnessing digital infrastructure.

The public-private partnership (PPP) framework will be overhauled, with new regulations effective from June 2025 to streamline processes and attract investment in infrastructure. Key areas for PPP engagement include Transnet’s rail and port networks, as well as independent power transmission expansion.

Building State Capability and Fighting Corruption
To ensure efficient public spending, the Treasury will conduct an audit of ghost workers and review over 100 public employment programmes for duplication and inefficiencies. The government is also strengthening law enforcement capabilities to combat financial crimes and corruption, aligning with the recommendations of the Financial Action Task Force and the State Capture Commission.

However, opposition parties and civil society groups have questioned the effectiveness of these measures, citing past failures to root out corruption effectively. “While these reforms are commendable, the government has a poor track record of enforcing accountability. We need to see action, not just promises,” said Corruption Watch director Karam Singh.

Conclusion
Minister Godongwana emphasized that the budget is a product of tough choices but necessary for economic recovery and stability. “The people are not fighting for ideas in anyone’s head; they are fighting for material benefits, to live better and in peace,” he quoted from Pan-African leader Amilcar Cabral.

While the government remains committed to its fiscal strategy, the mixed reactions from opposition parties, businesses, and consumers indicate that challenges lie ahead in implementing the budget successfully. With bold policy shifts and a commitment to inclusive growth, the 2025 Budget sets a determined course for economic revitalization, though its success will hinge on effective execution and sustained accountability.

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