The South African National Budget for 2025 was originally scheduled to be tabled by the Minister of Finance, Enoch Godongwana, on 19 February 2025. However, for the first time since 1994, the Budget Speech was postponed due to a lack of consensus within the Government of National Unity (GNU) – particularly over a proposed 2% increase in the value-added tax (VAT) rate, to 17%.

In March, Godongwana tabled a revised Budget reducing the VAT hike to 0.5% a year over 2 years to raise R43 billion in additional revenue. This revised Budget also faced parliamentary opposition, mostly from the EFF and the DA, over the VAT increase.

The finance minister finally scrapped the idea of a VAT increase when he tabled a third Budget that replaced some of the revenue expected from higher VAT with a general fuel levy increase. This revised plan won cautious backing from the DA and passed with a parliamentary majority.

Revised 2025 National Budget

The revised Budget reduced SA's 2025 GDP growth rate from 1.9% in the March Budget to only 1.4%. Instead of the proposed VAT increases, the Budget withdrew any expansion of zero-rated items, increased the general fuel levy, and has proposed another R20 billion in unspecified tax measures for 2026/2027.

The revised Budget has had to reduce additional government spending by R52.5 billion over the medium term, mainly affecting education, health, defence, correctional services, and home affairs.

The inflation-linked increase in the general fuel levy for petrol and diesel (the first in 3 years) to R4.01c/l and R3.85c/l respectively will translate to South Africans paying R3.5 billion in additional tax revenue.

State of South Africa's economy

The Budget reduces spending on social grants by R6.6 billion over the medium term, which reflects the removal of increased social grant spending designed to mitigate the impact of the previously proposed VAT increase.

Debt-servicing costs remain one of the fastest-growing areas of government spending. In fact, this is projected to be R1.48 billion higher in 2025/2026 than the original March 2025 Budget projections. This means debt-servicing costs are projected to make up 16.6% of total expenditure in 2025/2026, up from 11.1% as recently as 2019/2020. As a percentage of total revenue, interest costs are expected to be 22%, with government spending of R1.35 trillion on servicing debt over the 3-year period. In other words, 22c of every rand of state spending will be spent paying interest on debt.

Most economists, and even politicians, have welcomed the finance minister’s willingness to negotiate, following the political wrangling that held up the first Budget. The final version of the 2025 Budget acknowledged the high tax burden faced by South Africans – the removal of the VAT increase was an admission that any further tax hikes would add enormously to the strain that many households and businesses already face.

Instead, the minister chose to control expenditure and not borrow further to make up for the tax revenue shortfall. Many economists, however, have also pointed to the ongoing rise in debt service costs, which could severely undermine government efforts to uplift the economy and produce stronger economic growth.

Budget reforms

National Treasury has announced plans to revamp the 2026 Budget preparation process, hoping to avoid the political opposition that saw the 2025 Budget rejected twice. Treasury has officially stated that reforms will be made to 'clarify trade-offs, reduce waste, and prioritise high-impact programmes'. A review of the 2025 Budget process found 'fragmented decision-making, poor policy-budget alignment, and weak consensus on trade-offs in a context of competing priorities and limited fiscal space', which prompted the reforms.

While Treasury is authorised to prescribe the format for the presentation of the Budget, it has stated that it will retain the key objectives of the 2025 Budget, including what it calls a targeted and responsible savings (TARS) approach, to help cut costs and create revenues for national investment priorities.

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