Cape Town – Finance Minister Enoch Godongwana tabled a contentious yet consequential 2025 Budget in Parliament on Wednesday, marked by critical social relief extensions, above-inflation grant increases, a phased VAT hike , and renewed funding for the South African National Defence Force (SANDF).
The speech, delayed due to Cabinet disagreements over a proposed 2% VAT increase, ultimately balanced fiscal prudence with urgent social and security needs.
Key highlights
- 28 Million Beneficiaries: Nearly 28 million South Africans will access social grants in 2025/26, with a R284.7 billion allocation for permanent grants.
- SRD Grant Extended: The Covid-era R370 Social Relief of Distress (SRD) grant, initially set to expire, was extended by a year to March 2026 with R35.2 billion allocated. Godongwana warned: “If you allowed me to cut the SRD, I wouldn’t increase anything. I’m faced with increased expenditures which are not in the budget.”
- SASSA Increases:
- Old Age and Disability grants rise by R130 to R2,315/month.
- Child Support Grant increases by R30 to R560/month.
- Foster Care Grant up by R70.
2. VAT Hike and Fuel Levy Reprieve
- VAT Increases: A two-step hike—0.5% in 2025/26 and another 0.5% in 2026/27—will raise VAT to 16%, generating R28bn in 2025/26. Godongwana defended the move: “No minister of finance is ever happy to increase taxes… [but] VAT is the most effective way to avoid further spending cuts.”
- Fuel Levy Frozen: No increase to the fuel levy for 2025/26, saving consumers R4bn.
3. SANDF Funding for Peacekeeping
- R5bn Allocated to support SANDF’s deployment in the Democratic Republic of Congo (DRC) under the Southern African Development Community (SADC) mission.
Fiscal strategy and debt Stabilisation
Godongwana emphasised macroeconomic stability, targeting a primary surplus of 0.9% of GDP by 2025/26 and stabilizing debt at 76.2% of GDP. Debt-service costs (R389.6bn in 2024/25) now exceed health, police, and education spending. Eskom’s debt relief was adjusted, saving R20bn by reducing the final phase from R70bn to R50bn.
Infrastructure Investment
Over R1-trillion is allocated for infrastructure over three years:
- R402bn for transport/logistics (including R100bn for SANRAL road upgrades).
- R219.2bn for energy (notably, private sector participation in transmission projects).
- R156.3bn for water/sanitation, including dam projects in KwaZulu-Natal and the Western Cape.
Tax and Revenue Measures
- No inflationary adjustments to personal income tax brackets, raising R28bn.
- VAT Zero-Rating Expansion: Canned vegetables, dairy blends, and organ meats added to alleviate food inflation.
- SARS Boosted: R3.5bn allocated to improve tax compliance, targeting 156,000 non-compliant taxpayers.
Public Sector Wages and Service Delivery
- A three-year wage agreement adds R7.3bn in 2025/26.
- Health and Education:
- R28.9bn to retain 9,300 healthcare workers and hire 800 post-community service doctors.
- R19.1bn to keep 11,000 teachers in classrooms.
- Early Childhood Development (ECD): Subsidy increases from R17 to R24/day per child, benefiting 700,000 children.
Security and Anti-Corruption
- R9.4bn for defence and correctional services, with R5bn earmarked for SANDF’s DRC mission.
- Funds allocated to combat financial crimes, aligning with recommendations from the State Capture Commission and Financial Action Task Force.
Controversies and reforms
- VAT Debate: The delayed budget stemmed from Cabinet disputes over the VAT hike, linked to SRD grant costs.
- State Efficiency Overhaul: Godongwana announced audits for “ghost workers,” rationalising 100+ labour market programs, and merging conditional grants to curb waste.
2025 Budget Speech in a glance
Godongwana framed the budget as a “bold and pragmatic” balance between growth and social protection, urging Parliament to endorse “difficult but considered policy choices.”
Quoting Amilcar Cabral, he stressed the need to secure “material benefits” for citizens.
Read the full speech here.
