Finance Minister Enoch Godongwana delivered the 2025 Budget Speech, outlining the government’s spending plans for the coming years. The Minister proposed an increase in VAT by 0.5% in 2025/26 and another 0.5% in 2026/27, bringing it to 16%.
With economic growth sitting at just 0.6% in 2024, efforts are being made to push it up to 1.8% through structural reforms and major infrastructure investments.
Debt is expected to peak at 76.2% of GDP by 2025/26, while the budget deficit is set to gradually shrink to 3.5% by 2027/28. Eskom’s revised debt relief plan will cut government costs by R20 billion, and a phased VAT increase will push the rate up to 16% by 2026/27 to boost revenue.
Infrastructure remains a top priority, with over R1 trillion allocated to transport, energy, and water projects over the next three years. Healthcare and education funding will help retain essential workers, while social grants will increase to provide much-needed support for vulnerable communities. Additional funding is also set aside for law enforcement and corruption-fighting efforts. The budget aims to balance economic stability with social welfare, ensuring key services continue to function while preparing for long-term growth.
Key highlights from the speech:
- Economic Growth & Stability: The economy grew by only 0.6% in 2024, with a projected 1.8% growth over the medium term. Government aims to boost growth through structural reforms and investment in infrastructure.
- Government Debt & Fiscal Plans: Debt will stabilize at 76.2% of GDP by 2025/26. The budget deficit is set to narrow to 3.5% by 2027/28.
- Eskom Debt Relief: The final phase of Eskom’s debt relief has been adjusted, reducing government costs by R20 billion.
- VAT Increase: VAT will increase by 0.5% in 2025/26 and another 0.5% in 2026/27, bringing it to 16%.
- Infrastructure Investment: Over R1 trillion will be spent on infrastructure over three years, focusing on transport (R402 billion), energy (R219.2 billion), and water & sanitation (R156.3 billion).
- Public Services & Wage Bill: R28.9 billion is allocated to retain 9,300 healthcare workers and hire 800 new doctors. Education receives R19.1 billion to retain 11,000 teachers.
- Social Grants & Support: Old-age and disability grants increase by R130 to R2,315, while the child support grant rises to R560. The R350 SRD grant is extended until March 2026.
- Security & Law Enforcement: R9.4 billion is allocated for defense and correctional services, with additional funds to combat financial crimes and corruption.
- Local Government & Service Delivery: Reforms aim to improve municipal services, disaster response, and infrastructure funding.
- Public-Private Partnerships: New regulations will streamline partnerships to boost investment in transport, energy, and logistics.
The speech emphasizes a balanced fiscal approach while prioritizing economic growth, social welfare, and public service improvements.
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