Overview of South Africa’s 2025 Budget Highlights
Finance Minister Enoch Godongwana presented South Africa’s 2025 Budget, which includes planned VAT increases and substantial funding for health and infrastructure projects, amidst previous disagreements within the government. Key reforms aim to improve efficiency in public spending.
In a significant move, Finance Minister Enoch Godongwana presented South Africa’s 2025 Budget to Parliament following an extensive discussion among Cabinet ministers, who initially rejected the reworked proposal that excluded the contentious 2% VAT increase. The presentation was delayed in February due to internal disputes regarding the VAT hike within the Government of National Unity (GNU).
Key tax proposals include an increment in the VAT rate by 0.5 percentage points in both 2025/26 and 2026/27, ultimately raising it to 16%. Additionally, there will be no inflationary adjustments to personal income tax brackets, rebates, or medical tax credits, with these changes expected to yield R28 billion in 2025/26 and R14.5 billion in 2026/27. Furthermore, R3.5 billion will be allocated to the South African Revenue Service (SARS) this year, complemented by R4 billion over the medium term.
The budget delineates R232.6 billion in additional funding for pivotal programs throughout the medium term, with provinces receiving a total of R2.4 trillion during the Medium-Term Expenditure Framework (MTEF) period. The local government equitable share will increase from R99.5 billion to R115.7 billion by 2027/28, while the public sector wage agreement is projected to incur an extra R7.3 billion cost in 2025/26. Early Childhood Development subsidies will see a R10 billion increase, and health spending is set to grow from R277 billion to R329 billion by 2027/28. Social grants will experience increases as well: Old Age/Disability grants (+R130), Child Support (+R30), and Foster Care (+R70). The COVID-19 Social Relief of Distress initiative will be extended for another year with an allocation of R35.2 billion.
A considerable R1 trillion will be designated for public infrastructure projects over the next three years, which comprises R402 billion for transport and logistics, R219.2 billion for energy infrastructure, and R156.3 billion for water and sanitation projects. New public-private partnership regulations will come into effect on June 1, 2025, and the Budget Facility for Infrastructure will be reconfigured to facilitate multiple bid windows, with the first infrastructure bond anticipated to be issued in 2025/26.
Efforts to enhance state capability and budget reforms are outlined as Treasury will spearhead initiatives aimed at improving spending effectiveness and efficiency. An audit to identify “ghost workers” in various national and provincial departments has been mandated, and the implementation of conditional grant review recommendations will be prioritized. Additionally, R1.7 billion is allocated for future disaster preparedness, while R4 billion is designated for addressing recovery backlogs.
The presentation of South Africa’s 2025 Budget delineates a comprehensive approach toward addressing critical economic and social needs. The proposed VAT increases and tax adjustments aim to bolster revenue, while significant allocations in health, education, and infrastructure illustrate the government’s commitment to enhancing public services. Furthermore, ongoing reforms in state efficiency reflect an essential focus on fiscal responsibility and accountability moving forward.
Original Source: allafrica.com
