Finance Minister Enoch Godongwana presented South Africa’s 2025 Budget, highlighting a 0.5% VAT increase in 2025/26 and 2026/27, with no inflationary adjustments to personal income tax brackets. Key spending includes R232.6 billion for essential programs, R1 trillion for public infrastructure, and an emphasis on improving government spending efficiency.
On the occasion of presenting South Africa’s 2025 Budget, Finance Minister Enoch Godongwana confirmed that the Cabinet had reconvened to address significant disagreements regarding a proposed VAT increase. This budget was originally scheduled for presentation in February but faced delays due to these contentious issues.
The 2025 Budget reveals important revenue and tax proposals, including a 0.5 percentage point VAT increase set for 2025/26 and a subsequent increase in 2026/27, reaching a total of 16%. Furthermore, there will be no inflationary adjustments to personal income tax brackets, rebates, or medical tax credits, with expectations to raise R28 billion and R14.5 billion in the respective fiscal years. An allocation of R3.5 billion to the South African Revenue Service (SARS) in the current year is also notable.
Key spending priorities have allocated R232.6 billion in additional funding for essential programs over the medium term. Provinces will receive R2.4 trillion throughout this period, while local government equitable shares will rise to R115.7 billion by 2027/28. A public sector wage agreement will incur an extra R7.3 billion in 2025/26, with an investment of R10 billion increasing Early Childhood Development subsidies. Health expenditure is set to increase significantly, and social grants will see increments for various categories.
A considerable commitment of R1 trillion will be directed towards public infrastructure over the next three years with specifics including R402 billion for transport and logistics, R219.2 billion for energy infrastructure, and R156.3 billion for water and sanitation. The establishment of new Public-Private Partnership (PPP) regulations and a reconfiguration of the Budget Facility for Infrastructure for multiple bid windows are on the agenda.
In terms of state capability and budget reforms, the Treasury will spearhead initiatives to enhance spending efficiency. Measures include auditing for “ghost workers,” implementing conditional grant review recommendations, and allocating R1.7 billion for future disaster management, alongside R4 billion for recovering backlogs.
The 2025 Budget of South Africa marks a critical juncture with significant adjustments in taxation, spending priorities, and infrastructure investments. The planned VAT increases and lack of inflationary adjustments to tax brackets reflect the government’s intent to enhance revenue while addressing pressing social and infrastructural needs. Moreover, a reformed approach to public spending aims to bolster efficiency and effectiveness in the delivery of government services.
Original Source: allafrica.com
