National Budget

South Africa’s National Budget in 2025: Where to from here?

After serious political pressure within the GNU that culminated in the scrapping of the 0.5% VAT increase, South Africans will turn their attention to the third iteration of the National Budget in 2025. Budget 3.0 will re-table government’s finance and spending priorities for the year against a backdrop of rising debt and economic pressure.
 

• Finance Minister Enoch Godongwana will re-table the national budget to Parliament on 21 May
• It will be the result of heated political debate within the GNU and key disagreements around economic policy
• Any increase in VAT – initially proposed at 2%, then revised to 0.5% – is officially off the table
• It’s unclear how the rest of the budget has been adjusted to make up the shortfall that would have been covered by VAT increase
• South Africa continues to battle its rising debt obligations, which now stand at 76% of GDP, while the budget deficit grew further to 5%

What was said at the Budget Speech 2024?

The Minister of Finance Enoch Godongwana walked a tightrope in providing financial assistance to Eskom, supporting households, and increasing investment spending.  There was very little on economic reforms, emphasising the urgency for a shift in gears from blueprint policy documents to implementation.

Some of the key points were:

• Government taps GFERCA funds to help reduce the country’s greatest debt burden in almost 80 years.
• Gross national debt hovers around 74% and is expected to stabilise at 75% in 2025.
• No increase in VAT or fuel levies.
• While there is no increase in personal income tax, a decision not to adjust tax brackets for the new financial year will push some taxpayers to a higher tax bracket.
• The South African economy remains severely constrained, plagued by infrastructure challenges, lower commodity-driven revenue and a bloated public wage bill.

What is South Africa's budget deficit?

South Africa has a budget deficit of R258 billion to date, projected at -5% of GDP. Further slippage remains likely, but is expected to strengthen in the next two years to -4%.